S&P 500 Index Slips Further As 10-Yr Bond Yields Push Above 1.33

Summary:

The S&P 500 index is trading more than 0.7% lower as the rising bond yields continue to pressurize the overextended index.

Rising bond yields for the 3rd session in a row continue to pressurize the S&P 500 index. The S&P 500 is down 0.73% as of the time of writing, as investment funds flow into the bond market.

The S&P 500 index is still expected to outperform the bond market over 10 years, according to research by Capital Economics. The team at Capital Economics feels that US equities could outdo long-dated treasuries in the next decade. More specifically, the projection of Capital Economics for the 10-year TIPS is 1.5%, plus an assumed equity risk premium of 4pp.

The yield on the 10-year US Treasury asset is 1.275 as of the time of writing, off the intraday high at 1.331.

But what is the price picture in the short term?

Technical Outlook for S&P 500

Today’s decline sends the S&P 500 index towards the previous support at 3870. If the bears can take out this support level, a decline towards 3823.9 (8/14 January high) could be on the cards. This scenario brings 3765.1 and 3721.2 into the picture as underlying downside targets.

On the other hand, a bounce on the 3870.0 price level allows the S&P 500 index to aim for a new record high, but only if it can overcome the existing record high at 3950.1.