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S&P 500 Growth at the Back of Correction in the Yield of Bonds

3/7/2023 12:32 PM

The leading US economy index S&P 500 is correcting, trading at around 4059.0.

The instrument is actively adding in value against the backdrop of falling yields of treasury bonds, which at the moment reached annual highs, but then corrected. Since late autumn last year, the level of 4.000% for 10-year bonds has been considered key for investors' decisions. The sharp decline to the current 3.958% was perceived as artificial market regulation, reflecting zero prospects for further recovery of positions, which in turn caused a shift in investor capital from bonds to equities.

In addition, auctions were held yesterday to place short-term three- and six-month securities. The fact that the fixed rates of 4.765% and 4.970% are only marginally higher than 4.750% and 4.940% at the last placement indicates an extremely limited potential for further upward dynamics of returns and is a determining factor when choosing investment instruments in favor of the stock market.

The growth leaders in the index are Lumen Technologies Inc. (+4.10%), Merck & Co. Inc. (+3.95%), Domino’s Pizza Inc. (+3.79%), Enphase Energy Inc. (+3.77%).

Among the leaders of the decline are DexCom Inc. (-7.87%), Newell Brands Inc. (-7.23%), VF Corp. (-5.37%).

The index quotes continue the corrective trend, trading within the local ascending corridor with the boundaries of 4000.0-4360.0 on the daily chart.

Technical indicators are ready to reverse and issue a new buy signal: fast EMAs on the Alligator indicator are approaching the signal line, and the AO histogram is forming upward bars being in the sale zone.

Support levels: 4000.0, 3900.0. | Resistance levels: 4100.0, 4200.0.

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