Let”s cut to the chase. Long before the Fed heads made their hawkish comments Tuesday morning, we all knew what is plaguing this market: rising interest rates.
The acronym TINA —There Is No Alternative — to the stock market applies here, and all types of investors are flocking to some kind of yield.
Another False Rally: Before the opening Tuesday, investors were hoping the S&P 500 index could break its miserable five-day losing streak. Going back further, the index has been in the red in seven of eight sessions. The recipe for a rally was there.
Stock index futures were noticeably high as the greenback was in the red, and the iShares 20+ Yr Treasury Bond ETF (NASDAQ:TLT) was trading higher.
As a rule of thumb, if you anticipate interest rates to rise in the future, you do not want to own any long-term bonds such as the TLT, which is a 20-year.
PreMarket Prep Plus Discusses The Turn: During a brand new segment of PreMarket Prep Plus, which was at 10 a.m. Tuesday, co-host Dennis Dick discussed the turn in the TLT that made him skeptical of the premarket rally.
“We had a turn late in premarket trading in the TLT, in fact, I tweeted it out, that is when the TLT started rolling over,” he said. “A few minutes ahead of the open when TLT began to sell off, I thought the indexes may follow it lower.”
Dick concluded: “If the bonds cannot stabilize, then the market is going to continue lower. We all are worried about interest rates, and they are going higher.”
As of 2 p.m., the index has made a new low for the year at 3,636 and is not far off that level. The entire PreMarket Prep Plus Covers The Segment can be found here:
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