NEW YORK (TheStreet) -- Although the S&P 500 hit another all-time high last week, the picture beneath the surface is much less bullish.
In 2013, what was going on beneath the surface didn't matter. Stocks were moving higher on strong momentum. Nothing else mattered to investors. But, alas, we are not in 2013 anymore. The S&P 500 is close to flat year-to-date; it was up over 9% at this point in 2013. Investors don't seem to be giving equities the same benefit of the doubt as they did last year.
We last saw weakness beneath the surface in mid-January, and a 6% correction followed shortly thereafter. The S&P 500 marched higher in February in recovering from that correction, but has stalled over the past few weeks as we are starting to see signs of weakness.
First, long-term U.S. Treasury yields are moving lower. While many are talking about a "rising rate" environment after the Federal Reserve's statement last week, what we are really seeing is a flattening of the yield curve.Yields on shorter-duration bonds, such as the two-year Treasury note, are moving higher, while yields on longer-duration bonds, such as the 30-year Treasury bond, are moving lower. This flattening tends to be a contractionary signal for the equity markets.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV