Markets’ Scary Divergence Is Worrisome

Since the end of 2017, yields on two-year Treasurys have risen by nearly a full percentage point and the 10-year note’s yield has risen by eight-tenths of a point, even as stocks climbed until recently.

For example, during the biggest one-day stock-market decline in history, in 1987, the 10-year yield fell to 9.4% from 10.15%. One of the only exceptions was a particularly scary day in 2008 when stocks plunged on fears that the global financial system would unravel.

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Reuters -
Graphic: Rising U.S. bond yields bring back Wall Street's sinking...

In further evidence that stocks can rally despite rising Treasury yields, LPL Research found that in all 12 periods of rising 10-year yields since 1996, the S&P 500 ended the period higher than it began, according to senior market strategist Ryan Detrick.

Historically, according to Goldman Sachs, rising bond yields have not posed major issues for stocks as long as their ascent has been gradual. For example, a yield rise in a month of one standard deviation or less, which would be 20 basis points currently, is manageable for stocks, Goldman said in a note last week.

The Guardian -
Dow Jones slides more than 800 points in worst day for eight months

The Dow Jones Industrial Average plunged more than 800 points, its worst drop in eight months, led by sharp declines in technology stocks.

Aetna intends to sell its Medicare Part D prescription drug benefit unit to complete the $69 billion acquisition.

Fox News -
Stocks lower as Treasury yields tick higher

Big tech stocks helped fuel the selling as investors weigh the threat of rising U.S. treasury yields and global trade spats.

Traders were closely monitoring Treasury yields, which were hovering around a 7-year high and creeping higher after steadying Tuesday. Barring a dramatic last-minute turnaround, the S&P 500 was en route to a five-day losing streak, its worst fall in six months and the longest sequence of daily declines since a nine-day string of losses ended Nov. 4, 2016.

Wall Street Jurnal -
Bond Market Freaking You Out It May Spark a Healthy Rotation

The market overall might be fine, but trouble lies with the FANGs and other acronym stocks that have been leading the market higher

(In a post-quantitative-easing quirk of the bond market, this term premium is currently negative, but less negative than it was.) Instead, bond yields were pushed up almost entirely by a higher term premium, the extra yield offered above expected interest rates for locking up money for 10 years.

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