* Dow, S&P gain; Nasdaq slips
* Tech rebound pauses; financials rise
Sept 19 - Welcome to the home for real-time coverage of U.S. equity markets brought to you by Reuters stocks reporters and anchored today by April Joyner. Reach her on Messenger to share your thoughts on market moves: april.joyner.thomsonreuters.com@reuters.net
SUGAR HIGH (1145 AM EDT/1545 GMT)
JP Morgan on Monday said to cut holdings in U.S. equities and build exposure in emerging markets equities, which are trading at distressed levels.
"The large U.S. fiscal boost this year, as well as the delayed positive impact of weak USD and low rates from last year created a 'sugar high' for US assets this year," strategists led by Marko Kolanovic wrote in the note.
As the benefits from President Donald Trump's tax reform wear off, U.S. economic growth and earnings growth are set to decline, Kolanovic said.
"We gradually trim exposure to US stocks and dollar assets, as they acted as a trade war 'safe haven' so far, but investors may ultimately rotate into more attractive foreign assets if trade concerns ease," Kolanovic wrote.
"We expect convergence of macro fundamentals between U.S. and international markets in the coming quarters; with equity markets tending to price forward fundamentals by ~6-12 months, the time for the rotation may be now," he added.
Here is a sample of asset class and ETF year-to-date percent returns that shows stark U.S. outperformance vs. the world (TR data):
(Lance Tupper and Terence Gabriel)
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INTEREST RATES ON VERGE OF BRINGING THE PAIN: BAML (1100 AM EDT/1500 GMT)
The 10-year Treasury yield US10YT=RR is continuing its advance past 3 percent today. But though we're in a period of cyclical inflation, long-term, we're in an era of structural deflation, thanks to tech disruption, aging demographics and excess debt, according to BAML strategists.
U.S. stocks are set to outperform Treasuries for the seventh year in a row, the longest streak since the 1929 stock market crash that ushered in the Great Depression, BAML points out. Meanwhile, brokerage commissions have slumped since 2000, as seen in the chart below.
But we may be arriving at the point where rising interest rates bring pain to the market. The underperforming housing market is one key indicator, though Wednesday's data shows a healthy increase in housing starts.
BAML's strategists advise looking closely at financial stocks .SPSY to identify the tipping point.
When rates rise but the sector falls, that may hint at coming pressure on GDP growth and EPS estimates. On the latter, BAML strategists believe the Street is too optimistic. "It is worrying to see long-term EPS estimates have also soared to 16 percent, the highest level since the tech bubble & new paradigm narrative of 2000," they write.
(April Joyner)
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DOW, S&P HIGHER, TECH WEIGHS ON NASDAQ (0952 AM EDT/1352 GMT)
At the open, all three major indexes edged up, but the Nasdaq .IXIC gave quickly up its initial gains as tech stocks .SPLRCT went negative.
Despite major consumer electronics getting a reprieve in the latest round of U.S. tariffs on Chinese products, the levies still affect several tech components.
The rise in the 10-year Treasury yield is benefiting financial stocks .SPSY , which are adding the most gains to the S&P 500 .SPX .
Aside from tech, the sectors in the red are mostly defensive.
(April Joyner)
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S&P 500 INDEX: MAY SUCCUMB TO GRAVITY (0915 AM EDT/1315 GMT)
The S&P 500's .SPX rocket ride to new highs may be encountering gravitational pull, or at a minimum, has dissipating thrust.
Indeed, after rising to fresh record levels in late August, the index has struggled to generate further upside. The SPX is up just 0.1 percent MTD, putting it on track for its smallest monthly percentage gain since August 2017.
Momentum studies confirm the engine is sputtering. The monthly RSI is also on pace for its smallest incremental rise in 13 months.
Additionally, although the SPX is currently on track for its highest monthly close ever, the RSI continues to badly lag. It remains well below its all-time high seen in January of this year. (click chart for details)
This momentum divergence can flag reversal risk. Of note, major SPX tops in 1998, 2000, 2007 and 2015 were accompanied by divergence. Thus, the RSI breaking below the 70.00 overbought threshold can potentially coincide with SPX falling back to earth.
However, even if the study can rise to challenge the extreme reached in January, it will then, once again, be historically overbought.
As was seen, even a setback to alleviate such an overbought condition can be vicious. The SPX plunged nearly 12 percent in just 10 trading days when it reversed from its January peak.
(Terence Gabriel)
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FUTURES SLIP AS FOCUS SHIFTS FROM TRADE TO U.S. YIELDS (0836 EDT/1236 GMT)
Futures edged lower, taking a breather after all three major indexes closed on the plus side on Tuesday. The U.S. trade spat with China seems for the moment to have taken a back seat to a rise in Treasury yields, with the 10-year note moving further above the symbolic 3 percent mark. stocks also appeared less obsessed with tit-for-tat tariffs, taking some cheer from China's move to levy only a 10 percent duty on $60 billion of U.S. imports.
Investors appear to be judging that China is running out of room to respond to any further U.S. tariffs on dollar-for-dollar basis, raising concerns that they may resort to measures other than tariffs in what could be a protracted trade battle.
Stocks like Apple AAPL.O , Boeing (NYSE:BA) BA.N and Caterpillar (NYSE:CAT) CAT.N that have been the most trade sensitive recently were little changed in premarket trade.
Companies in the spotlight were Praxair (NYSE:PX) PX.N , which rose 3.4 percent after a source told Reuters German industrial gases group Linde LIN1.DE was to sell additional assets to gain U.S. approval for the pair's planned merger. (Full Story)
Juniper Networks (NYSE:JNPR) JNPR.N climbed 2.2 percent after Nomura upgraded shares of the network gear maker.
(Alden Bentley)
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