Treasury Yields Up, Stocks Inch Higher on Mixed Data

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It was another quiet session for stocks as traders await big catalysts looming on Friday. These include the May payroll report, the Greek debt payment deadline, and the OPEC oil production decision. So, for now, equities are content to remain range bound near levels first reached back in December.

stock-market-today-185There was action in other markets, however, with currencies, bonds, and commodities making some flashy moves as folks reacted to mixed economic data.

In the end, the Dow Jones Industrial Average gained 0.4%, the S&P 500 gained 0.2%, the Nasdaq Composite gained 0.5%, and the Russell 2000 gained 1%.

dow jones industrial average

The 10-year Treasury yield hit 2.4%, its highest level since November, in response to a big backup in eurozone bond yields after firmer inflation for the euro area was reported on Tuesday.

The increase in yields hit the dividend-sensitive utility sector hard, which lost 1.4% overall; but bank stocks benefited from the lift to net interest margins, with Bank of America Corp (NYSE:BAC) rallying 1.6% and Citigroup Inc (NYSE:C) up 1.7% as both break of out multiweek funks.

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While European Central Bank president Mario Draghi reiterated that his institution was committed to full implementation of its bond buying stimulus despite the inflation turnaround, he added that markets should get used to higher volatility. The hint was that some of this was technical in nature caused by low trading volume in some areas of the bond market.

This uncomfortable truth pushed the iShares 20+ Year Treasury Bond Fund (NYSEARCA:TLT) down below its mid-May lows to hit lows not seen since before the Thanksgiving holiday.

There were more conflicting headlines about Greece, with Reuters reporting officials in Athens threatening default if a compromise with creditors isn’t ironed out by Friday or Monday. Yet Reuters also pinned the day’s stock market gains on hopes of a Greek deal.

Go figure.

On the economic front, ADP private payrolls increased 201,000 in May, up from the downwardly revised 165,000 result for April and in line with the 200k consensus estimate. Analysts are looking for a 220,000 result in the government’s payroll report on Friday, with the unemployment rate holding steady at 5.4%.

payroll employment

Separately, the ISM non-manufacturing report slipped to 55.7 in May from 57.8 in April in the weakest reading of the year but still indicating solid month-over-month growth.

Energy stocks were also weak, down 0.7% as a group, after crude oil lost 2.6% to close at $59.66 — losing the $60-a-barrel threshold that’s been a magnet for prices since late April. A larger-than-expected inventory draw was fingered for the weakness.

The chatter out of Vienna, courtesy of officials from Russia and Kuwait, is that an OPEC production cut is off the table with the two policy options being a production increase or holding at current levels.

With Saudi Arabia, OPEC’s big swing producer, ramping up supply in recent weeks all indications are that OPEC wants prices to dip in the near-term in order to increase the pressure on U.S. shale producers and recapture market share — a strategy Riyadh used in the mid-1980s.

I continue to recommend the ProShares UltraShort Crude Oil (NYSEARCA:SCO) to Edge subscribers in anticipation of another breakdown in energy prices. The position gained nearly 5% today.

Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/06/treasury-yields-up-stocks-inch-higher-on-mixed-data/.

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