What Happened
US Treasury yields surged toward the critical 5.00% level on Tuesday as investors sold government bonds amid mounting inflation concerns. The sell-off was driven by spiking energy prices linked to the Iran conflict, with WTI crude oil climbing sharply, adding fuel to an already hot inflation environment. Bond prices fall when yields rise, reflecting the market’s expectation that the Federal Reserve may need to keep rates higher for longer.
Key Levels
S&P 500 Support: 5,200 (recent consolidation zone) and 5,050 (200-day moving average). S&P 500 Resistance: 5,400 (prior swing high) and 5,500 (all-time high region). WTI Crude Support: $82.00 and $78.50. WTI Crude Resistance: $90.00 and $95.00.
Technical Picture
The S&P 500 is trading below its short-term 20-day moving average, signalling near-term weakness. The Nasdaq is also under pressure, with tech stocks particularly sensitive to rising yields as higher rates erode the present value of future earnings. RSI on the S&P 500 is hovering near 42 โ approaching oversold territory but not yet at a level that typically triggers a strong bounce. WTI crude is in a clear short-term uptrend, trading above both its 20-day and 50-day moving averages.
What Traders Are Watching
All eyes are on whether the 10-year Treasury yield breaks and holds above 5.00% โ a level last seen in October 2023 that triggered a sharp equity sell-off. A confirmed break above 5.00% could accelerate selling in the S&P 500 toward the 5,050 support. For ASX traders, a weaker Wall Street session would likely drag the ASX 200 toward support at 7,700, with resistance capping any bounce near 7,900. Watch CBA and ANZ as rising global yields can pressure local bank valuations.
Bias
Bearish. Rising yields above 5% historically act as a headwind for equities. Until energy prices stabilise and inflation data cools, the path of least resistance for risk assets remains lower.
Source: CNBC Markets