U.S. markets showed strength on the open following solid earnings but quickly lost momentum within the first half-hour of action. The selling pressure accelerated during the afternoon and into the closing bell as the 10-year treasury yield officially hit 3%.

This exasperated fears of money moving out of the market and into safer havens while pushing volatility above a key level of resistance.

The Dow dropped 1.7% after bottoming at 23,828 while closing below the 24,000 level for the first time in 11 sessions. The S&P 500 stumbled 1.3% after testing a low of to 2,617 while holding 2,600 and a level that has held the majority of April.

Both indexes came within 1% of breaching their 200-day moving averages.

The Nasdaq fell for the 4th-straight session after tumbling 1.7% on the fade to 6,961. The index has been holding 7,000 for 11th-straight sessions with a close below this level being a bearish development.

The Russell 2000 gave back 0.6% following the backtest to 1,542 but was able to hold its 50-day moving average into the closing bell.

Industrials and Materials showed the most sector weakness after plummeting 2.8% and 2.7%, respectively. Technology and Consumer Discretionary sank 1.7% and 1.6%.

Utilities and Real Estate bucked the trend after climbing 0.7% and 0.1% and were the only sectors that closed higher.

Global Economy – European markets were mixed following weaker-than-expected economic news. UK’s FTSE 100 added 0.4% and France’s CAC 40 was up 0.1%. Germany’s DAX 30 dipped 0.2% and the Belgium20 was off 0.1%. The Stoxx 600 Europe slipped less than a tenth-point, or 0.02%.

The German April IFO business climate fell 1.2 to 102.1, below expectations of 102.8.

UK March public sector net borrowing unexpectedly slipped 0.3 billion pounds, weaker than expectations for a gain of 1.3 billion pounds.

Asian markets finished mostly higher after China said it might use its tightening campaign to boost domestic growth. China’s Shanghai surged 2% while Hong Kong’s Hang Seng rallied 1.3%.

Japan’s Nikkei rose 0.9% and Australia’s S&P/ASX 200 was higher by 0.6%. South Korea’s Kospi shedded 0.4%.

Chinese President Xi Jinping mentioned the need to boost domestic demand for the first time since 2015 and dropped a reference to deleveraging on concern trade as debt risks could hit economic growth.

S&P Corelogic Case-Shiller rose 0.74% to 206.67 for February.

The FHFA House Price Index was up 0.6% to 261.1 in February, ahead of forecasts for an increase of 0.5%. All nine regions posted gains, led by the East South Central at 1.6%. The 12-month changes were all positive, as well, with low inventories continuing to support prices.

New Home Sales for March checked-in at 694,000, topping expectations of 630,000.

The Richmond Fed Manufacturing Index plunged 18 points to -3 in April, its lowest reading since September 2016, and below forecast for a print of 16.

Consumer Confidence increased to 128.7 in April, up from 127 in March, and topping expectations of 126.1.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) traded lower throughout the session while tapping a low of $117.76. Upper support at $118-$117.50 was split with a close below the latter leading to $117-$116.

Lowered resistance is at $118.50-$119.

Market Analysis – The Spiders Dow Jones Industrial Average ETF (DIA) fell for a 5th-straight session after trading down to $238.12 intraday.

Backup support at $238-$237.50 held with a close below the latter likely leading to a further backtest to $235-$234.50 and the 200-day moving average. Near-term resistance is at $239.50-$240.

RSI is in a major downtrend with support at 40 now in play. There is risk to 30 and February/ March lows on continued weakness. Resistance is at 45-50.

The Real Estate Select Sector Spider (XLRE) closed slightly higher despite the backtest to $30.16. Support at $30 from early and mid-March held with a close below the latter signaling additional weakness to $29.75-$29.50.

Resistance is at $30.50 and the 50-day moving average.

RSI is trying to hold support at 40. A close below this level would signal additional weakness and a possible backtest to 30 and January/ February support.

Resistance is at 45-50.

All the best,
Roger Scott