US: 10-year yields steady, S&P slightly weak - BBH

Analysts at BBH note that the US 10-year yields steady last week, ending a two-week decline as the yield is about 10 bp lower than it had finished July. 

Key Quotes

“There is some congestion from May and June that extends closer to 2.10%.  If the Trump trade (or what at least one journalist suggest is the Cohn trade) is being unwound, recall that the US 10-year yield was averaging close to 1.80% in the month before the US election last November.  Before the weekend, the September 10-year note futures poked above 127-00.  It has only done this two other sessions this year and was rebuffed.  Some minor bearish divergence was appearing in the technical indicators which did not confirm the end of the week rally.   A break of 126-00 may need to signal anything of technical significance.”

“The S&P 500 fell nearly two-thirds of a percent last week.  It was the second weekly decline.  The loss on August 17 of 1.5% was the second largest of the year.  The S&P 500 gapped lower before the weekend and quickly filled the gap.  That initial pre-weekend loss was sufficient to fill another gap from mid-July.  It also tested the year's uptrend that we draw off a couple of lows in January and the May low.  It was near 2419 before the weekend and near 2425 at the end of next week.  From the high on August 8 to the pre-weekend low, the S&P 500 pulled back almost 3%.”

“Many still seem inclined to buy the pullback they have been anticipating.  However, a break of 2400 may see a loss of nerve.  Of the technical indicators, the Slow Stochastics have turned higher, and the RSI looks set to do so.  The MACDs are still moving lower, but are now below zero, which was where it bottomed in April.    The Russell Value Index and Growth Index both fell last week for the second consecutive week.  The Value Index has fallen 2.75% over the two-week period, while the Growth Index is off 1.70%.”