This article was written exclusively for Investing.com
Following Thursday’s rally when the Dow and Russell 2000 set new record highs, index futures dropped sharply lower ahead of the US open on Friday, along with gold. The dollar was higher across the board.
The culprit? Rising yields.
The 10-year bond yield returned to 1.6% after President Biden signed off on the latest $1.9 trillion stimulus plan, which has boosted the prospects of stronger recovery and inflation. Such a scenario would require tighter monetary policy from the Fed, which is seen as particularly bad for high-flying technology stocks. Investors worry that yields will rise further, making growth companies’ future cash flows less worthy.
So, keep a close eye on the NASDAQ, after the tech-heavy index ran into strong resistance again following a few days of solid gains. The sellers have stepped back in after the index rallied into resistance around the shaded region shown on the chart. This is where the point of origin of the initial breakdown converges with the now falling 21-day exponential moving average:
NASDAQ Daily