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WILL RISING YIELDS DERAIL EQUITIES?

The U.S. 10-Year Treasury yield US10YT=RR has hit 4.6410%, or its highest level since early May.

Yields have risen in recent weeks on concerns that inflation will persist above the Federal Reserve’s 2% annual target next year and impede the U.S. central bank’s ability to continue cutting rates.

With this, the yield is building on its early December weekly closing breakout above the resistance line from its October 2023 high:

Initial support is now at 4.505%.

The weekly Ichimoku Cloud resides in the 4.34%-4.38% area, though given its thinness, the support it provides may be less significant.

Still, the yield is above both the Cloud and the former weekly resistance line, which is now support around 4.36%, suggesting it has an upside bias.

The April high was at 4.739%, and the October 2023 peak was at 5.021%.

A weekly closing break of a number of Fibonacci-based moving averages, including the 34-, 55-, and 89- week moving averages, which are now all packed in a tight range between 4.16% and 4.19%, as well as the early December low at 4.126%, would suggest downside pressure may intensify.

Meanwhile, on Thursday, in premarket trade, U.S. equity index futures are lower across the board. Of note, since September, both the S&P 500 index .SPX and the yield have generally advanced together. However, it's now been 12 trading days since the SPX last scored a record closing high. Over this period, the yield has jumped around 50 basis points:

(Terence Gabriel)

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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)