A
couple of reasons can be attributed to the market’s increasing sensitivity to
news. One is the fact that interest rate
on the 10-year Treasury note has been rising lately. As we talked about in the previous report,
this puts pressure on stocks and the longer the rising trend in Treasury yields
continue, the more vulnerable the stock market becomes to short-term selling
pressure.
The
CBOE 10-Year Treasury Note Yield Index (TNX), shown below in relation to its
15-day moving average, was up 4.22% on Wednesday as Treasury prices fell. Also worth mentioning is that prices for
corporate bonds and high-yield debt have been falling while yields have been
rising. This is a potentially negative
combination for stocks heading into the summer if the trend persists.
[Excerpted from the May 22 issue of Momentum Strategies Report]
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