U.S. markets were hit for heavy losses on Thursday following the surge in government bond yields.

The yield on 10-year Treasury note, a bellwether for risk sentiment around the world, jumped to 3.188% Thursday.

This was up from 3.159% on Wednesday, and represents the 10-year T-note’s highest level since July 2011.

Bond prices fell as yields rose with the major indexes all falling more than 1%.

Volatility surged to its highest peak since mid-August after closing above key levels of resistance.

The Nasdaq tanked 1.8% after bottoming at 7,833 late in the session. August and upper support at 7,825-7,750 held on the close back below the 50-day moving average.

The Russell 2000 sank 1.5% following the pullback to 1,643. Upper June support at 1,640-1,630 held with a move below the latter being a continued bearish development.

The Dow dropped 0.8% after fading to a low of 26,471 intraday. Prior support at 26,400-26,350 held with a close below the latter likely leading to 26,200-26,000.

The S&P 500 sank 0.8% following the backtest to 2,883 late in the session.

Upper support at 2,875-2,850 and the 50-day moving average held with a close below the latter being a continuing bearish development.

Utilities and Financials were the only sectors to show strength after climbing 0.8% and 0.6%, respectively.

Technology and Consumer Discretionary led sector weakness after sinking 1.8% and 1.5%. Communication Services and Health Care fell 1.4% and 1%.

Global Economy – European markets were weak across the board as the drop in U.S. bond prices triggered losses for perceived riskier assets around the globe as yields rose.

France’s CAC 40 tumbled 1.5% and UK’s FTSE 100 stumbled 1.2%. The Stoxx 600 Europe gave back 1.1% and the Belgium20 was off 0.8%. Germany’s DAX 30 dipped 0.4%.

The German Markit September construction PMI declined 1.3 to 50.2.

UK September new car registrations fell 20.5% year-over-year to 338,834, the biggest decline in nearly 8 years. Year-to-date new car registrations ore down 7.5% to 1,910,820.

Asian markets settled mostly lower with South Korea’s Kospi tanking 1.5% on reports that the Bank of Korea may hike interest rates later this month.

Hong Kong’s Hang Seng sank 1.7% and Japan’s Nikkei fell 0.6%. Australia’s S&P/ASX 200 was up 0.5%. China’s Shanghai remained closed for a weeklong holiday.

Challenger Job-Cut Report announced layoffs at 55,285 for September. Restructuring was the main reason behind the layoffs, followed by closings, and bankruptcy.

Hirings surged 578,700 to 596,000, helped by the 422,800 jump in retail as the holiday hiring season begins.

Jobless Claims checked in at 207,000 versus forecasts of 213,000 in the week ending September 29th. The 4-week moving average rose to 207,000 versus 206,500 previously.

Continuing claims fell 13,000 to 1,650,000 in the week ending September 22nd.

Factory Orders for August were up 2.3%, topping expectations of 2.1% for the month.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) fell for the 4th time in 5 sessions after trading to a fresh multi-year low of $113.71.

Fresh support at $113.75-$113.25 held.

A close below the latter could lead to a continued backtest to $112-$111.50 and March 2017 support levels. Lowered resistance is at $114.50-$115.

Market Analysis – The Spiders Dow Jones Industrial Average ETF (DIA) fell for the first time in 6 sessions following the pullback to $264.58.

Mid-September support at $264.50-$264 held with a close below the latter likely leading to a retest towards $263-$262.50.

We mentioned in late September a move back above prior resistance at $266 would be a very bullish development.

This area was cleared and led to the recent record run to $269.28.

A close back above $266.50-$267 keeps $269-$270 in play.

RSI is back in a downtrend with support at 60. A close below this level could lead to additional weakness towards 55-50. Resistance is at 65.

Sector (XLB) has been in a nasty downtrend since late September and has traded lower in 8 of the past 10 sessions.

Thursday’s trip to $57.61 held near-term and shaky support at $57.75-$57.50. A close below the latter would be a continuing bearish signal.

Lowered resistance is at $58.25-$58.50.

Continued closes above $59 and the 50/200-day moving averages would be a more bullish development and signal a possible short-term bottom is in.

RSI remains in a downtrend with support at 40. A close below this level would signal additional weakness near 35 and June lows. Resistance is at 45-50.

Current Position Update

STX gaining value.

QCOM is holding rather well.

NFLX should bounce back before expiration.

TLT is at $1.99 right now – I will hold the position in case it will bounce back before expiration since there’s no further downside.

Roger Scott