The New Test For The Market

A new test of the market's resiliency: if the two year auction was not great, today's just-completed five-year auction was clearly a disappointment; this raises the spectre of higher interest rates, and stocks are accordingly under some pressure.

The bid-to-cover ratio (an indicator of investor interest) of 1.92 was the lowest since Sept 2008; the yield of 2.689 percent was higher than expected.

As a result, interest rates have moved up across the middle and longer end of the Treasury yield curve.

As for stocks...interest-rate sensitive sectors (housing, REITs, autos) are under some pressure...anyone who might need to refinance or has a capital intensive business as well.

Tomorrow's $28 billion, 7-year auction is now a little bit more of an event.

The Dow lost 50 points as the auction results were announced; if we can end the day anywhere near the flatline, the bulls will really have reason to crow.

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