Morning Notes — Yields Lower/Curve Flatter

The S&P 500 (SPX) closed last week at a record high after seven consecutive days of gains added +2.6%.  The Nasdaq 100 gained +3.2% over that same period as Tech outperformed (largest sector weight in the SPX) when 10-year yields fell from 1.49% to 1.42%.  Tech is outperforming again today as 10-year yields move lower on the back of disappointing June services ISM.  Value sector performance over the past 7 sessions was solid as 10-year yields held technical support in the mid-1.40s.  That’s not the case today as 10-year Treasury yields move to intraday levels around 1.37%. We’ve been expecting higher yields, but our preference for value sectors is based on expectations for curve steepening.  We put the preference on hold early last week when the 5/30 curve broke below secondary support at 120bps.  The 5/30 year curve is now at 118.4bps and our preference for value sectors remains on hold, at least until it steepens back through that level.