Rising Treasury yields are exerting pressure on the S&P 500, which the SPDR Portfolio S&P 500 ETF (SPLG) tracks. The bond market has been volatile, with the 10-year U.S. Treasury yield reaching 4.72% earlier today, its highest since 2023. This surge in yields is partly due to strong economic data, including the ISM services PMI for December, which came in at 54.1, surpassing expectations. The robust labor market, highlighted by the JOLTS job openings exceeding forecasts, has also contributed to the upward pressure on yields. These developments have raised concerns about inflation and the Federal Reserve's future policy actions, leading to a cautious sentiment in equity markets.
The S&P 500 is also facing technical challenges, with analysts pointing to a deteriorating situation as the index starts 2025 on a weak note. Despite a positive year-to-date performance, the market is grappling with the implications of rising interest rates and the fading Gen AI hype. The upcoming December labor market report is anticipated to be a critical test for the index, potentially pushing it into a correction if the data disappoints. Additionally, the market is digesting the Federal Reserve's December meeting minutes, which indicated a potential slowdown in policy easing, further influencing investor sentiment.
The SPLG ETF is currently priced at $69.16, reflecting a slight decline of 0.16% from its previous close.