S&P 500 Could Stay above 4,200 If Bond Yields Remain below Historic High of 5%

U.S. stocks can avoid the downtrend as long as its bond yields remain below a historic high of 5%, according to Bank of America’s Chief Strategist Michael Hartnett.

Despite being one of the bearish strategists in Wall Street, Hartnett said that the S&P 500 Index will be able to continue trading above the 4,200 level in the near time if the dollar and yields remain at the lower level. On the other hand, oil prices above $100 a barrel and a clear sign that a credit crunch for small business was causing higher unemployment could tarnish that scenario.

Hartnett wrote in the report that the S&P 500 at the 4,200 mark is also close to the 200-day moving average, which is considered a key technical support level. The index dropped close to that level in early October after a spike in US bond yields to 16-year high, following the escalation of Israel-Hamas conflict. However, the S&P 500 bounced back 2.8% since then as yield retreated.