DJ Intraday Update: Dow Up Triple Digits--That's What We Call a Bounce! -- Barron's Blog

By Crystal Kim

Stocks are bouncing back in earnest Friday. The Dow Jones Industrial Average has notched a gain greater than 200 points as early week losses shrink in the rear-view mirror. Streaks, even losing ones, are meant to be broken. In today's Intraday Update, we...

--...examine other broken streaks (Hint: financial stocks);

--...highlight three exchange-traded funds to consider for a flattening yield curve;

--...explain why Walgreens Boots Alliance (WBA) is sliding.

The Flattening

The Dow has climbed nearly 1% to 24,453.82. The S&P 500 has risen 0.7% to 2737.64, while the Nasdaq Composite has gained 0.6% to 7548.91.

Better still, the Financial Select Sector SPDR (XLF) broke its 13-day losing streak as the Utilities Select Sector SPDR (XLU) broke its eight-day winning streak. The trends within these streaks are more significant, noted Frank Cappelleri, Instinet technical analyst, in his morning report. "One day of counter-trend action was bound to happen, so, now it's all about the follow-through," he wrote. "The most important asset class for the future prospects of both the XLF and XLU continues to be interest rates."

With the Federal Reserve's greater focus on what's going on at home, it looks to be on pace to raise rates by 25 basis points or 0.25% at every quarterly meeting this and next year. U.S. core inflation is at or above target, the unemployment rate is slipping below NAIRU estimates. "Recent communications from the Fed suggest external factors will bear little importance in conducting the FOMC monetary policy going forward," wrote Canaccord Genuity's Guillaume Arseneau in a report published Friday.

Arseneau has an Overweight rating on real-estate investment trusts and a Market Weight rating on financials. Generally, he doesn't think it's time for investors to get into defensive sectors such as staples, health care, telecos, and utilities before the U.S. bond yields invert. With his maximum target for U.S. 10-year yields at 3.25%, he estimates the U.S. 10-year to 2-year curve will invert sometime in the spring of 2019.

What do ETFs stand to get a boost from a flatter yield curve? A Ned Davis Research Group screen for non-levered stock funds with at least $1 billion in assets under management that also lands in the bottom decile of funds based on short- and long-term sensitivity to the slope of the yield curve turned up some obvious finds: REIT funds. In fact, nine of the 13 funds that turned up were in that category including the Vanguard Real Estate ETF (VNQ), the Schwab US REIT ETF (SCHH), and the iShares U.S Real Estate ETF (IYR). Non-REIT funds included the VanEck Vectors Gold Miners (GDX), VanEck Vectors Junior Gold Miners (GDXJ), Utilities Select Sector SPDR (XLU), and Vanguard Utilities (VPU).

S&P 500: +0.7% to 2737.6

Dow 30: +240 points or 1% to 24,453.82

Nasdaq: +0.0.6% to 7548.91.

Russell 2000: +0.4% 1651.50

Vix: -11.1% to 14.98

10-year Treasury Yield: 2.85%

Midday Movers

Allison Transmission (ALSN) is up 2.2% to $40.79 after Mizuho initiated coverage with a Buy rating.

Ally Financial (ALLY) is up 4.1% to $26.77 after Janney Montgomery Scott upgraded it to Buy.

Celgene (CELG) is up 5.2% to $80.65 and Acceleron Pharma (XLRN) is up 48.9% to $48.20 after the companies reported positive trial data for their treatment of low-to-intermediate risk myelodysplastic syndromes, a form of cancer.

Vertex Pharmaceuticals (VRTX) is up 14.4% to $168.78 after disappointing data from Galapagos N.V. (GLPS) showed that its cystic fibrosis treatment, used with Vertex's Orkambi, did not match Vertex's triple combo, securing Vertex's lead in the space.

Walgreens Boots Alliance (WBA) is down 0.7% to $59.29, continuing its declines from yesterday, after Jefferies and Robert W. Baird downgraded

 it to Hold.   -- Teresa Rivas  

Sign up to Review & Preview, a new daily email from Barron's. Every evening we'll review the news that moved markets during the day and look ahead to what it means for your portfolio in the morning.

    More at Barron's Stocks to Watch blog, http://www.barrons.com/stocks-to-watch    

(END) Dow Jones Newswires

June 29, 2018 13:17 ET (17:17 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.