The Dow and Bond Yields Push Higher After the Release of a Strong Jobs Report

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After a strong jobs report was released this morning, investors quickly began buying stocks and moving out of bonds. The Dow Jones Industrial Average (DJINDICES: ^DJI  ) opened this morning up more than 100 points and, despite a mid-morning decline, managed to close the day up 147 points, or 0.98%. But, bond investors surely didn't have as good of a day, as Treasury bond yields quickly shot higher and closed well above were they were yesterday. The 10-year Treasury bond opened the day yielding 2.5%, and closed at 2.72%, while the 30 year T-Bill opened at 3.5%, and closed at 3.68%. The jobs report showing better-than-expected results was likely the reason for both the stock rally and the changes in bond yields. On one hand, a strong jobs market means the economy is doing well and businesses are busy enough to increase employee head counts; but this also means that the Federal Reserve may soon begin slowing its bond-buying program, and allow interest rates to start creeping higher.

This morning I commented on how stocks like McDonald's and Procter & Gamble are likely beginning to feel the pressure of higher bond yields. Investors looking for safe reliable returns had moved into dividend payers and, more so, dividend aristocrats in recent years, as bond yields fell below what strong solid dividend payers were offering. But now that Treasury yields are increasing, these stocks will feel some selling pressure as investors move back to the safety and consistency of bonds.

Higher bond yields will not only hurt the dividend payers, but also companies which operate in the housing industry, such as Lennar (NYSE: LEN  ) , which feel 4.02% today, and D.R. Horton, which lost 3.24% this afternoon. As bond yields rise, so do mortgage interest rates and, thus, we will surely see a decline in home sales or, at the very least, a slowing of housing price increases as demand and supply level out. The difference between what a home can be built for, and what it can sell for, is where these companies make their money. Over the past few years, we have seen this difference increase. But it may soon slow down, resulting in lower revenues and profits for the home builders.

Other big losers today where the mining companies as Newmont Mining (NYSE: NEM  ) and Cliffs Natural Resources (NYSE: CLF  ) both declined sharply, losing 4.27% and 2.49%, respectively. The declines came as a result of precious metals having a terrible day; gold fell 3.13%, silver lost 4.89%, platinum declined by 1.51%, and copper sold for 3.45% less today than just days ago on the New York Mercantile exchange. 

Within the Dow itself, only three components ended the session lower: McDonald's, Procter & Gamble, and Cisco (NASDAQ: CSCO  ) , which fell lower by a mere 0.08%, or $0.02. There was very little news pertaining to the stock today, and volume was extremely light, as only 19 million shares traded hands when the average per day over the past three months has been over 41 million. Shareholders should not be concerned by today's move, as the stock currently trades at just 13 times past earnings, or 11 times future expected earnings. The company continues to build its business on the global stage, and it would be a good time to add to a current position. 

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DOW 18,339.24 110.94 0.61%
S&P 500 2,171.37 11.44 0.53%
NASD 5,318.55 12.84 0.24%

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9/28/2016 5:27 PM
^DJI $18339.24 Up +110.94 +0.61%
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Cisco Systems CAPS Rating: ****
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NEM $39.21 Up +0.73 +1.90%
Newmont Mining CAPS Rating: ***