Wall Street stocks down as US bond yields hit new highs

Investors were attracted by the rise in bond yields and dropped stocks.
US stocks down led by technology stocks, Apple is down 4.1% on the day.

Flavio Tosti Independent Analyst

The three main US indices closed lower on the last day of the week. The S&P 500, the Dow Jones and the Nasdaq all closed below their 50-period simple moving average. The S&P 500 Index dropped 0.90% to 2,670 while the Dow Jones Industrial Average DJIA lost 0.80% to 24,463 and the Nasdaq Composite Index fell 1.3% to 7,146.

The decline was led by technology shares, especially Apple which dropped 4.1% on Friday on the back of comments from Morgan Stanley bank which said that Apple's iPhone sales for the June quarter will disappoint the market. Ten of the eleven S&P 500 main sectors closed in the red. The technology sector was down 1.5% while the consumer staples sector was down 1.68% on the day.

Collaborating to the drop in stocks is the rise of the US bond yields. Investors decided to rotate their assets and turned to bonds. The 10-year Treasury Note jumped to 2.96% close to 2014 highs. Behind the move are the stronger US economy and increasing US inflation.

"I am calling this a momentum trade because it has largely been driven by commodity prices. As we have learned over the last few years, those baskets can rise and fall at any time as certain short-term factors cause spikes in prices, then settle back down into a more 'normal' trading range." commented Kevin Giddis, head of fixed income at Raymond James.

S&P500 Index Daily chart

The main trend is bullish but the market is currently having a pullback. Resistances are seen at 2,718.75 and 2800 swing highs while support lies at 2,650 swing low (early March) and at 2,551.75 cyclical low.

Author

Flavio Tosti

Independent Analyst

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