A rally in Treasuries pressured stocks and had indexes giving back a portion of Monday’s ‘strange’ rally. The S&P 500 fell 0.47% and the NASDAQ 0.72%. The small cap index, Russell 2000, again was demolished – down 1.61%. Aside from the Russell the 10 year yield was in high focus today as it broke recent support levels – in an improving economy the yield should be going higher, not lower so the fact it is doing the reverse has some scratching their heads. In economic news, U.S. data showed potential signs inflation pressures may be creeping up. Producer prices recorded their largest increase in 1.5 years in April as food prices surged.
Here are the longer term indexes for the S&P 500 and NASDAQ. As we keep repeating it is difficult to get too excited about the market until the NASDAQ can create a new high, which it is failing to do. A bear might say it is creating the right shoulder of a head and shoulders formation – of course we would need to see a break below a “neckline” for that to confirm.
Below is the chart of the 10 year Treasury yield – as you can see it broke a first level of support that has held since November:
For those who enjoy the NYSE McClellan Oscillator it has not been doing much of late, simply rotating slightly above and below the 0 level. This indicator is useful at extremes which it has not been for a while.
Retail stocks were especially weak today as people remain concerned about the consumer, especially in light of that awful retail sales figure for April. Here is an ETF for the sector:
Deere (DE) which actually had been holding up quite well, being a large cap company was hit today as the farm equipment company cut its full-year sales outlook even as it reported a better than expected quarterly profit.
Shares of online retailer Zulily Inc (ZU) shot up in heavy volume of more than 9.7 million shares, after dropping to a record low earlier in the day following the expiration of the lockup period after its initial public offering in November. This stock was a market darling post IPO but has been crushed along with all the other momentum stocks lately.
We had a reader request for natural gas – we won’t chart the ETF(s) that track natural gas because they do not work very well – they have a lot of issues similar to leveraged ETFs in how they use specific products to try and track the underlying index they are supposed to mirror; but those products are faulty leading to incorrect long term pricing in relation to what they are trying to copy – in this case natural gas. Specific to natural gas nothing good is happening here – it’s been a long sideways slag and now we are seeing it break down.