NEW YORK ( TheStreet) -- When the U.S. equities markets opened after Memorial Day stocks gapped higher due to commitments by central banks around the world to continue their quantitative easing programs.
The rally stalled shortly after 10 a.m. following a positive reaction to the Conference Board's reading on consumer confidence came in at 76.2, the highest level since the 2008/2009 recession ended. Even with a five-year high for confidence this reading remains below neutral range of 90 to 110 last seen in 2007 before the recession began. A 76.2 reading actually should be interpreted as consumers being less depressed. The major equity averages then stalled shy of their all-time and multi-year highs and drifted lower for the remainder of Tuesday's session.
On Wednesday the theme song changed to "What a Difference a Day Makes" as Treasury yields spiked higher with the 30-year bond yield rising to a 52-week high at 3.37%. With rising yields bond traders chimed in with the thought that the bond market was beginning to factor in an early end to the quantitative easing measures in the U.S.
With stocks higher on Tuesday and with a higher 30-year bond yield the ValuEngine Valuation Warning intensified to a new high for the year. ValuEngine shows that 73.8% of all stocks are overvalued with 36.9% overvalued by 20% or more. Only 10.8% of all stocks are undervalued by 20% or more.
In this environment ValuEngine upgraded three Internet services stocks also known as social media stocks. ValuEngine also downgraded two Dow components and another important stock in the computer and technology sector. The computer and technology sector is 17% overvalued with the Internet services industry 20% overvalued.
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