The 10-year yield has moved up seven of the last nine trading days. During that time, the yield has moved from a low of 4.51% to the current yield at 4.780%. Prior to that move, the yield had moved up from a December 6 low of 4.126%. Since mid-September, the yield is up from 3.60%. Those are pretty hefty rises.
The yield today is at its highest level going back to October 31. The high yield for 2023 reached up to 5.021% back on October 23. Does the market take yields back to 5%?
If so, that will likely keep the pressure on the stocks as they continue their reaction to the yields and ignore the things that sent stocks higher after the Trump win:
- Tax cuts
- Less regulation
- Lower energy prices
- A trade policy that does not get to the “trade war stage”, but gets favorable concessions.
Conversely, IF the yields rotate lower with 4.74%, and 4.64%, the next targets, that would take some of the pressure off stocks and could shift the storyline to the more positive scenarios.
Taking a look at some of the large cap winners from the prior few years, recent declines are fairly large:
- Apple -11.7%
- Nvidia -15.3%
- Microsoft -9.3%
- Amazon -7.09%
- Plantir -25%
- Tesla -20%
This week we have the PPI tomorrow and the CPI on Wednesday which could be a catalyst one way or the other.
PPI is expected to rise by 0.3% for headline and the core. The YoY is expected to rise to 3.4% from 3.0% and 3.8% from 3.4% which is not particularly encouraging.
CPI is expected to rise by 0.3% for the headline and 0.2% for the core. The YoY is expected to rise to 2.9% for the headline from 2.7% while the core is expected to remain unchanged at 3.3%.
Also ahead are the start of the earnings calendar with the financials leading the way starting on Wednesday.