Bond Selloff Dragging Down Stocks? Fundstrat: Technicals Don't Support a Deep Decline
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A global bond sell-off has pushed the 10-year Treasury yield to 4.694% and the 30-year to 5.285%, but Fundstrat technician Mark Newton argues the stock market's internal structure remains intact — making this pullback more likely a shallow, short-lived buying opportunity than the start of something worse.
Yields are surging — is money really fleeing stocks?
The 10-year Treasury yield sits at 4.694%, the 30-year at 5.285%. Drivers: inflation expectations, government-spending concerns, and a wave of corporate debt issuance from tech firms funding AI projects.
Rising yields should, in theory, pull capital from stocks into bonds. But Fundstrat chief market technician Mark Newton's latest note concludes: stock-market internals have not broken down.
This means → bond-market stress is real, but so far it has produced surface-level equity volatility, not a systematic retreat.
The Dow fell seven of nine days — why does Newton say it's near a bottom?
Newton calls the Dow the market's current "weak link" — down seven of the last nine sessions.
Yet the index has landed on a key structural support zone: the convergence of its July high and early-August breakout level. The uptrend line from March remains intact.
In plain terms = falling a lot is not the same as breaking the trend. The Dow has dropped onto a "floor," and Newton expects it to bottom this week and lead the next leg higher.
"Two-thirds of stocks are still above their long-term average" — why does that matter?
The Russell 3000 McClellan Summation Index — a tool measuring the balance of advancing versus declining stocks — is near its June peak. It has flattened but has not plunged, and a sharp plunge is typically the early warning of a broader sell-off.
More than 55% of stocks trade above both their 50-day and 200-day moving averages; the 200-day figure is roughly 65%.
This means → two-thirds of constituents remain above their long-term trend line. In plain terms = a one-day index drop does not mean most stocks are falling — the market is not disintegrating from the inside.
Credit markets and the fear gauge — any alarms going off?
The ratio of investment-grade bond ETF (LQD) to high-yield bond ETF (JNK) keeps falling → high-yield debt is outperforming investment-grade. This means → the market is still in "risk-on" mode, chasing higher-risk assets rather than fleeing to safety.
That ratio sits at the low end of its range since 2022, with no sign of reversing upward.
The VIX-to-VVIX ratio — a measure of whether panic is accelerating — stands at roughly 0.17, well below extreme-stress levels. Newton's read: any equity weakness will be shallow and short-lived.
Financials haven't cracked — what does that tell us?
Financials are the S&P 500's second-largest sector by weight. In a genuine risk-off episode, they are usually the first to break.
Yet financials are holding firm even as the equal-weight S&P 500 pulls back. This reflects the steepening yield curve — when long-term rates rise faster than short-term rates, banks earn a wider spread, which supports their earnings.
In plain terms = if the most rate-sensitive sector isn't panicking, the broader market probably isn't at panic stage either.
The bottom line: opportunity or warning?
Newton's summary: he views this weakness as a buying opportunity, not a warning, and expects the market to push to new highs before a choppier September arrives.
He flags three variables to keep watching: the path of long-end rates, oil prices, and whether tech stocks can hold their recent rebound gains.
This reflects a critical caveat — Newton's optimism rests on equity internals, but whether the bond market itself has truly bottomed remains the key variable that will validate or undermine that call. The two perspectives don't contradict each other, but investors need to watch both sides.
Content is for reference only, not financial advice.