S&P 500 tests 4200 as 10-year Treasury yield exceeds 5%
The yield on the 10-year U.S. Treasury note climbed above 5.0% on Monday, reaching a level last seen in July 2007.
Rising bond yields are a result of investors pricing in expectations of robust U.S. economic growth and concerns about fiscal challenges.
The surge in yields at the long end of the yield curve followed remarks from Federal Reserve Chair Jerome Powell, who suggested that the strong U.S. economy and a tight labor market might necessitate tighter financial conditions.
“The yield curve continued its bear steepening driven by stronger than expected macro data and elevated supply. The supply/demand dynamic, elevated supply and waning demand, will remain the primary driver of longer-dated Treasuries,” analysts at JPMorgan said.
The yield hit 5.021% on Monday, sending the S&P 500 half a percent lower. The index was trading at 4200 as of 06:20 EDT (11:20 GMT).
“A global risk-off tone continues with the ongoing conflict in the Middle East,” the analysts added.
The S&P 500 is now testing the key near-term support, which is located in the 4180-4200 zone.
Elsewhere, the U.S. dollar remained strong, maintaining its position around the 150 level against the Japanese yen. There's a belief that the Bank of Japan may intervene by buying yen in the open market to prevent a further decline beyond this point.
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