The S&P 500 showed a positive gain yesterday but lacked broad market participation. This, coupled with rising yields and increased short interest, suggests investors are navigating uncertain economic waters.
The S&P 500 rallied by about 75 basis points yesterday, but it remains a market with weak breadth. Breadth was notably weak in the morning, though it improved slightly as the day progressed. According to data from the Bloomberg 500 Index, Nvidia (NASDAQ:NVDA) saw a notable increase in short volume. From a technical perspective, the S&P 500 remains below the intraday highs seen on Friday, hovering around the 61.8% retracement level. The 10-Year Treasury yield rose six basis points to 4.
59%, marking a new high since bottoming out on September 17. This movement steepened the yield curve, with the 2-Year Treasury yield closing at +15 basis points, its highest level since early November 2022. This suggests the market anticipates short-term rates to be higher 18 months from now, potentially reflecting expectations of future Fed rate hikes. The Powell Indicator (3-Month Treasury Forward Spread) - The Powell Indicator refers to the spread between the 3-month Treasury yield 18 months forward and the current 3-month Treasury yield. It’s a tool for gauging market expectations of future interest rates, often reflecting predictions about Federal Reserve policy. A positive spread suggests that the market anticipates higher short-term rates in the future, which could indicate expectations of tighter monetary policy or economic growth. Short Interest Volume - Short interest volume measures the total number of shares sold short (borrowed and sold in anticipation of a price decline) but not yet covered or closed out. It’s a key indicator of market sentiment, as rising short interest may suggest increased bearish expectations or hedging activity
S&P 500 MARKET BREADTH YIELDS SHORT INTEREST FED
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