S&P 500 hits all-time highs despite rising yields

  • The Dow Jones Industrial Average was down 0.17% at 35,442.5.
  • The S&P 500 is just short of a record close on Wednesday. The Nasdaq rose 0.5%.
  • US yields are hitting new cycle highs with more to come.

U.S. stocks are on Thursday as government bond yields hit a new five-month high after initial jobless claims fell to their last low since the start of the pandemic.

The Dow Jones Industrial Average was down 0.17% at 35,442.53 on the day low after setting an intraday high, while the S&P 500 added 0.18% after six straight gains that left it just short of a record close on Wednesday. The Nasdaq rose 0.5%. The S&P 500 posted 51 new 52-week highs and no new lows; the Nasdaq Composite recorded 93 new highs and 33 new lows. Consumer discretionary stocks have held up the best so far, while materials and energy have lagged.

Seven of the 11 major sectors of the S&P 500 were trading lower, with energy stocks falling the most. So far, consumer discretionary has been the biggest percentage gainer among the S&P sectors, with help from Amazon.com Inc. Meanwhile, analysts expect S&P 500 earnings at third quarter are up 33.7% year-on-year, according to Refinitiv.

In the economic calendar, initial jobless claims fell to 290,000 in the United States in the week ended October 16, from an upwardly revised 296,000 the previous week. The four-week moving average fell from 15,250 to 319,750, a new low since the start of the COVID-19 pandemic. In other data, US existing home sales climbed 7% in September to a seasonally adjusted annual rate of 6.29 million from 5.88 million in August, beating expectations for a rise to 6 ,1 million.

Meanwhile, market-implied expectations for U.S. inflation over the next five years have risen to a 15-year high, as measured by break-evens, Bloomberg reported.

US yields did indeed rise on Thursday, with the 10-year posting a new high of 1.682% as it approaches March highs of 1.774% from a technical standpoint:

From a daily perspective, there are prospects for movement beyond the daily highs towards a -272% Fibonacci retracement of the current daily flag range:

S&P 500 Technical Analysis

The S&P 500 is a compelling technical picture given the countertrend and the combination of the W formation. Both are bearish as the countertrend line should act as resistance on a rest test and the W formation is a reversion pattern. Price should test the neckline of the W formation at 4,483 after a remnant of the countertrend.