Rise in US 10-yr yields clearly pressuring stocks, but Newton (Head of Technical Strategy) sees lower yields by year-end. Day 5 of "first 5 days" is Wed 1/8

Tom Lee, CFA

VIDEO: We believe the ISM services and commentary around tariffs is the reasons yields jumped higher today. But Mark Newton, Head of Technical Strategy, sees this rise in yields as nearing a peak.

Please click below to view our Macro Minute (duration: 5:18).

Rise in US 10-yr yields clearly pressuring stocks, but Newton (Head of Technical Strategy) sees lower yields by year-end. Day 5 of first 5 days is Wed 1/8

The S&P 500 is holding onto a modest gain of +0.5% so far YTD. And Wednesday (Jan 8th) is the 5th day (rule of “first 5 days”) and a positive YTD close historically is a good omen for the year (as previously discussed).

  • Equity markets fell on Tuesday (1/7, day 4) declining -1.1%, reversing what seemed like a positive start to the year. To us, it looked like equity markets are responding to higher yields. US 10-year yields surged on Tuesday to 4.67% and have been pushing highest since the early Dec yield lows of 4.10% and 4.569% (on 12/31).
  • It is never entirely clear why long-term yields are rising, but it seems much of the move took place after Tuesday’s release of ISM services (Dec) and JOLTS (job openings, Nov). And as RenMac notes, the ISM Services commentary contained a lot of commentary and angst around “tariffs and unknown impacts” — tariffs are viewed as adding to risk of inflation.
  • And JOLTS, while ostensibly stronger, meaning more job openings, the ratio of openings/available worker is still 1.13X and below the 1.22X pre-pandemic average and the Fed itself noted that labor markets are not currently a source of inflation. The December FOMC minutes will be released Wed and we will get some insights at that time.
  • The current S&P 500 close of 5,909.03 stands +27.7 points above the Dec 31 close of 5,881.31. And thus, Wednesday price action is something we are watching closely. The Dec FOMC minutes are likely more influential for equity price moves Wed. Also, the large CES conference is still ongoing in Las Vegas (until 1/11):
    – 1/6 Mon 9:45 AM ET: Dec F S&P Global Services PMI    56.8 vs 58.5e
    – 1/6 Mon 10:00 AM ET: Nov F Durable Goods Orders MoM    -1.2% vs -0.4%e
    – 1/7 Tue 8:30 AM ET: Nov Trade Balance    -$78b vs -$78be
    – 1/7 Tue 10:00 AM ET: Dec ISM Services PMI    54.1 vs 53.5e
    – 1/7 Tue 10:00 AM ET: Nov JOLTS Job Openings    8098k vs 7740ke
    – 1/8 Wed 9:00 AM ET: Dec F Manheim Used Vehicle Index
    – 1/8 Wed 2:00 PM ET: Dec FOMC Meeting Minutes
    – 1/9 Thu Markets closed National Day of Mourning for late-President Carter
    – 1/10 Fri 8:30 AM ET: Dec Non-farm Payrolls    163ke
    – 1/10 Fri 10:00 AM ET: Jan P U. Mich. 1yr Inf Exp    2.8%e
  • Regarding the “first 5 days” statistics, to recap (from earlier this week), since 1950, when looking at the “first 5 days”:
    – when S&P 500 up >10% prior year (n=41)
    – if S&P 500 1st 5 days positive, full year +13%
    – win-ratio 82% (n=28)
    – if S&P 500 1st 5 days negative, full year +3%
    – win-ratio 54% (n=13)
  • And directionally, over the past decade, this rule has worked:
    – since 2015
    – when S&P 500 positive first 5 (n=7)
    – S&P 500 gained 5 of 7 years
    – only losses were 2015 and 2018, 2018 Fed “hawkish”
    – other 5 were 2017, 2019, 2020, 2021 and 2023
    – those 5 were 20% or better for full year
  • Long term, Mark Newton, Head of Technical Strategy, actually has a year-end target for US 10-year yields of 3.25%, which is a sizable decline from current levels of 4.69%. In his 2025 Outlook (released today), he also sees yields peaking in the first quarter of 2025 around 5%, before declining.

Bottom line: While the start of 2025 is turbulent, fundamentals still the same as 2024 (strong)

If his view is correct, this rise in yields is a false flag and I would not get structurally bearish because of the recent surge in yields. However, keep in mind there has been technical damage to equities, and the rise in VIX is also signaling near-term challenges.

  • We are watfching the close on Wed (first 5 days)
  • We see 2025 as ultimately a positive year and with stronger gains in the first half
Rise in US 10-yr yields clearly pressuring stocks, but Newton (Head of Technical Strategy) sees lower yields by year-end. Day 5 of first 5 days is Wed 1/8
Rise in US 10-yr yields clearly pressuring stocks, but Newton (Head of Technical Strategy) sees lower yields by year-end. Day 5 of first 5 days is Wed 1/8
Rise in US 10-yr yields clearly pressuring stocks, but Newton (Head of Technical Strategy) sees lower yields by year-end. Day 5 of first 5 days is Wed 1/8
Rise in US 10-yr yields clearly pressuring stocks, but Newton (Head of Technical Strategy) sees lower yields by year-end. Day 5 of first 5 days is Wed 1/8

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Rise in US 10-yr yields clearly pressuring stocks, but Newton (Head of Technical Strategy) sees lower yields by year-end. Day 5 of first 5 days is Wed 1/8

Rise in US 10-yr yields clearly pressuring stocks, but Newton (Head of Technical Strategy) sees lower yields by year-end. Day 5 of first 5 days is Wed 1/8

Rise in US 10-yr yields clearly pressuring stocks, but Newton (Head of Technical Strategy) sees lower yields by year-end. Day 5 of first 5 days is Wed 1/8

Rise in US 10-yr yields clearly pressuring stocks, but Newton (Head of Technical Strategy) sees lower yields by year-end. Day 5 of first 5 days is Wed 1/8

Rise in US 10-yr yields clearly pressuring stocks, but Newton (Head of Technical Strategy) sees lower yields by year-end. Day 5 of first 5 days is Wed 1/8

Rise in US 10-yr yields clearly pressuring stocks, but Newton (Head of Technical Strategy) sees lower yields by year-end. Day 5 of first 5 days is Wed 1/8

Rise in US 10-yr yields clearly pressuring stocks, but Newton (Head of Technical Strategy) sees lower yields by year-end. Day 5 of first 5 days is Wed 1/8

Rise in US 10-yr yields clearly pressuring stocks, but Newton (Head of Technical Strategy) sees lower yields by year-end. Day 5 of first 5 days is Wed 1/8

Rise in US 10-yr yields clearly pressuring stocks, but Newton (Head of Technical Strategy) sees lower yields by year-end. Day 5 of first 5 days is Wed 1/8

Rise in US 10-yr yields clearly pressuring stocks, but Newton (Head of Technical Strategy) sees lower yields by year-end. Day 5 of first 5 days is Wed 1/8

Rise in US 10-yr yields clearly pressuring stocks, but Newton (Head of Technical Strategy) sees lower yields by year-end. Day 5 of first 5 days is Wed 1/8

Key incoming data January:

  • 1/2 9:45 AM ET: Dec F S&P Global Manufacturing PMI Tame
  • 1/3 10:00 AM ET: Dec ISM Manufacturing PMI Tame
  • 1/6 9:45 AM ET: Dec F S&P Global Services PMI Tame
  • 1/6 10:00 AM ET: Nov F Durable Goods Orders Tame
  • 1/7 8:30 AM ET: Nov Trade Balance Tame
  • 1/7 10:00 AM ET: Dec ISM Services PMI Tame
  • 1/7 10:00 AM ET: Nov JOLTS Job Openings Tame
  • 1/8 9:00 AM ET: Dec F Manheim Used vehicle index
  • 1/8 2:00 PM ET: Dec FOMC Meeting Minutes
  • 1/10 8:30 AM ET: Dec Non-Farm Payrolls
  • 1/10 10:00 AM ET: Jan P U. Mich. Sentiment and Inflation Expectation
  • 1/13 11:00 AM ET: Dec NY Fed 1yr Inf Exp
  • 1/14 6:00 AM ET: Dec Small Business Optimism Survey
  • 1/14 8:30 AM ET: Dec PPI
  • 1/15 8:30 AM ET: Dec CPI
  • 1/15 8:30 AM ET: Jan Empire Manufacturing Survey
  • 1/15 2:00 PM ET: Jan Fed Releases Beige Book
  • 1/16 8:30 AM ET: Dec Retail Sales Data
  • 1/16 8:30 AM ET: Jan Philly Fed Business Outlook
  • 1/16 10:00 AM ET: Jan NAHB Housing Market Index
  • 1/17 9:00 AM ET: Jan M Manheim Used vehicle index
  • 1/17 4:00 PM ET: Nov Net TIC Flows
  • 1/24 9:45 AM ET: Jan P S&P Global Manufacturing PMI
  • 1/24 9:45 AM ET: Jan P S&P Global Services PMI
  • 1/24 10:00 AM ET: Jan F U. Mich. Sentiment and Inflation Expectation
  • 1/24 10:00 AM ET: Dec Existing Home Sales
  • 1/27 8:30 AM ET: Dec Chicago Fed Nat Activity Index
  • 1/27 10:00 AM ET: Dec New Home Sales
  • 1/27 10:30 AM ET: Jan Dallas Fed Manuf. Activity Survey
  • 1/28 9:00 AM ET: Nov S&P CoreLogic CS home price
  • 1/28 10:00 AM ET: Jan Conference Board Consumer Confidence
  • 1/28 10:00 AM ET: Dec P Durable Goods Orders
  • 1/29 2:00 PM ET: Jan FOMC Decision
  • 1/30 8:30 AM ET: 4Q A 2024 GDP
  • 1/31 8:30 AM ET: Dec PCE Deflator
  • 1/31 8:30 AM ET: 4Q Employment Cost Index

Economic Data Performance Tracker 2025:

Rise in US 10-yr yields clearly pressuring stocks, but Newton (Head of Technical Strategy) sees lower yields by year-end. Day 5 of first 5 days is Wed 1/8
Source: Fundstrat, Bloomberg

Economic Data Performance Tracker 2024:

Rise in US 10-yr yields clearly pressuring stocks, but Newton (Head of Technical Strategy) sees lower yields by year-end. Day 5 of first 5 days is Wed 1/8

Economic Data Performance Tracker 2023:

Rise in US 10-yr yields clearly pressuring stocks, but Newton (Head of Technical Strategy) sees lower yields by year-end. Day 5 of first 5 days is Wed 1/8
Source: Fundstrat, Bloomberg
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