US Sectors vs. SPY & Some Yield Discussion

A couple of charts from the weekly Market Internals segment of NFTRH, bearing in mind that interest rates are going to have a say about sector relative strength going forward (for example, Financials and Energy tend to do relatively well in a rising long-term rate environment while Healthcare does not).

Financials are constructive, Energy is firm for a few days now (nominal XLE may be up to something short-term, pending yields, as we noted in an update a few days ago) but still in the downtrend, Healthcare is filling a gap up (funny how euphoria, either great or minor gets corrected so often in markets), Industrials are once again completely sideways and the Consumer items popped yesterday vs. SPY.

spx sectors

The weekly shows intact Financials, Healthcare and Industrials, downtrodden Energy and Consumer items not of interest as they go sideways and down trend, respectively (although look at Staples and its favorable rate correlation on the yields/sectors graph below).

spx sectors

The interesting thing to me is the near-term direction of bond yields and its effect of sectors. No single collection of data is foolproof in extrapolating the future but again, you see the likes of Financials and Energy preferring rising yields and Utilities (we’ve recently added XLU and its top stock components to the growing chart list in NFTRH) and BioPharma preferring declining yields.

yields vs. stock sectors

So before throwing darts at the stock market’s sectors, it makes sense to keep an eye on the bond/yield situation. I have my views on that as the story develops. We manage it closely each week in NFTRH, but on the big picture there is a chance that the hysterical Bloomberg headline R.I.P. Bond Bull will be right, maybe a year or so late. Here is the chart I created in response to that hype last December. The bond bull ends if/when the 10yr yield crosses 3%.


Here is a look at yields perched below their respective limiters.

bond yields

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