Investors Closely Watching Bond Market Moves

As the chart above shows, yesterday bonds experienced a huge selloff in price, driving yields dramatically higher. The 10-year yield surged to 3.70%, taking the bloom off the equity rose. Stocks closed near their lows, and have opened slightly weak this morning also.

Yesterday's Treasury auction was not weak, so I'm not sure what sparked the selloff, but there sure was a big move out of bonds. Today there is another auction, this time it will be a 7-year Note auction, which will be very closely watched.

One of the things that hit the market after the open was a report showing that new home sales for April were up only +0.3%, vs. expectations of +1.1%. But the small increase was still better than the -3.0% decline seen in March. Also in economic news, durable goods for April showed an increase of +1.9%, much better than the +0.5% consensus.

In oil news, OPEC agreed to leave output unchanged for the 2nd time in two months. This is helping support a rise in crude oil prices, which neared the $65 level this morning after an inventory report here in the U.S.

In corporate news, GM bondholders have agreed to a new deal, which appears to be a better restructuring plan for the company. Although the govt. has agreed to provide massive assistance to the ailing automaker. (bailout nation)

There was a story out after the close yesterday that the big hedge fund Pequot, run by Art Samberg, was closing down. I'm assuming that the press release of its closing would not have gone out ahead of them liquidating their positions, so there was some chatter on the Street that maybe some of the selling pressure yesterday stemmed from liquidations at Pequot. I'm sure more details will be forthcoming.

Trading comment: The SPX continues to trade above that 875 support I've mentioned, and lately has been rangebound between 875-925. So the best strategy seems to be to continue to trade around positions. I didn't make any trades yesterday, but I am still looking to add a little energy exposure via the oil services etf (IEZ). And stockwise, I would like to add a little to the financials, if we get more of a pullback in names like WFC, BAC, or GS.