Why breakouts in the dollar, Treasurys matter for the broader market

Call it a tale of two breakouts. The U.S. dollar index and the 10-year Treasury yield recently broke above levels that have provided recent resistance, and that could signal a broader market shift.

The U.S. dollar index in Monday trading came off of its best weekly performance of the year, though holding above the 94 level.

Matt Maley, equity strategist at Miller Tabak, took note on Friday of the dollar index breaking above that level of resistance "in quite a significant way."

The recent relative strength in the U.S. dollar could cause pain for emerging market equities, which have thrived this year against a weak dollar, Maley said Friday on CNBC's "Trading Nation."

On Monday, the yield on the U.S. 10-year Treasury pulled back from seven-month highs reached last week. The move came amid reports that President Donald Trump would select a relatively hawkish Fed chair.

A move higher in rates would prove beneficial for rate-sensitive stocks like banks and other financials, Maley said.

"Technology stocks should continue to be a good leadership group, but we might see some of the other groups shift as we've seen a nice rally in the bank stocks, and the energy stocks, as well," he said.

"Therefore, I think investors are going to need to stay nimble as we move through the rest of the year."


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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