LIVE MARKETS-Benchmark Treasury yield setback helping to stoke stocks

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BENCHMARK TREASURY YIELD SETBACK HELPING TO STOKE STOCKS

The U.S. 10-Year Treasury yield US10YT=RR fell to a two-week low on Tuesday after President Donald Trump refrained from imposing tariffs on his first day in office, but said he was thinking about them, unnerving markets and keeping investors worried about inflation.

In any event, stocks appear to have caught a tailwind from the falling yields.

After peaking at an intraday high of 4.809% just four trading days ago, the yield fell to as low as 4.53% earlier today. It now stands around 4.56%.

Chart congestion provides yield support in the 4.507%-4.505% area:

With its recent slide the yield has broken below a Fibonacci-based daily moving average (DMA), the 21-DMA, which is now acting as resistance at just over 4.63%. With this, there is another area of chart congestion, which is also a hurdle, at 4.641%-4.642%.

Of note, even though the yield has broken below its 21-DMA, this shorter-term moving average has yet to tick down. In fact, it is attempting to rise for a 22nd straight trading day.

Subsequent to significant yield peaks in October 2023 and April 2024, once the 21-DMA topped and ticked down two trading days in a row, the yield had entered into what would prove to be a protracted decline.

More recently, when the 21-DMA ticked down two straight days in early December, the yield found support at another Fibonacci-based moving average, the 55-DMA, and quickly resumed its uptrend.

The 55-DMA is now around 4.44% and rising around half a basis point per trading day.

Thus, traders will be watching to see how the yield now acts vs its 21- and 55- day moving averages for clues into what the next major move may be.

Meanwhile, stocks have been liking the recent decline in yields. Since the 10-year yield's January 13 closing high, and subsequent drop of more than 20 basis points, e-mini S&P 500 futures EScv1 are more than 3% higher.

The S&P 500 index .SPX ended Friday down less than 1.7% from its December 6 record closing highs.

(Terence Gabriel)

FOR TUESDAY'S EARLIER LIVE MARKETS POSTS:

RATES RISKS: CAUTION ON UTILITIES AND SMALL CAPS - CLICK HERE

GOLDMAN SACHS VIEWS TRUMP'S INITIAL TARIFF RHETORIC AS RATHER GENTLE - CLICK HERE

LUXURY BACK IN FASHION, WITH THREE FACTORS TO CONSIDER - CLICK HERE

WELCOME TO TRUMP 2.0 - EUROPEAN AUTOS, RENEWABLES AND STEELMAKERS SLIDE - CLICK HERE

BEFORE THE BELL: EUROPE HEADS SOUTH, WIND STOCKS EYED - CLICK HERE

TRUMP'S BACK, SO IS VOLATILITY - CLICK HERE

(Terence Gabriel is a Reuters market analyst. The views expressed are his own)