^GSPC Today: January 23 Yields Jump, Tariff Risks Spark Selloff
The S&P 500 fell after its worst session in three months, as rising Treasury yields and fresh EU tariff risks triggered a broad de-risking. With the U.S. 10-year near 4.29%, markets are pushing out the 2026 rate-cut path. Earnings season volatility is adding pressure as guidance matters more than beats. For Australian investors, this shift tightens financial conditions, lifts equity risk premia, and can sway AUD, commodities, and ASX sector leadership. We break down what to watch and how to position now.
Why yields are hurting risk assets now
A quick move toward 4.29% on the U.S. 10-year lifts discount rates and compresses multiples on growth stocks. It also challenges soft-landing hopes priced into the S&P 500. Markets are repricing 2026 cuts further out, which supports the U.S. dollar and weighs on global risk appetite. The message is clear: higher for longer remains the base case for now.
Higher yields tighten financial conditions, raise corporate funding costs, and reduce the present value of future cash flows. That mix hits long-duration tech and small caps first, then cyclicals. The S&P 500’s recent slide follows this playbook, as investors rotate toward cash flow quality and balance sheet strength. Liquidity-sensitive names remain the most vulnerable on spikes in rates.
For Australia, higher U.S. yields can pressure the AUD and lift global discount rates that feed into ASX valuations. Banks may benefit from net interest margins, while duration-heavy tech and healthcare can lag. Resource names are a wild card, driven by China data and commodity trends. We lean toward quality balance sheets and steady free cash flow in the near term.
Trade tensions return to the macro mix
Revived EU tariff risks have reminded markets that trade uncertainty did not fade. Tariffs can raise costs, hit margins, and slow cross-border demand. This overhang adds to the rates shock, amplifying equity volatility. Recent coverage of broad declines as yields rose underscores how policy risks can magnify drawdowns source.
If tariff headlines persist, global cyclicals, autos, semis, and industrial suppliers face more earnings risk. Defensives like utilities and consumer staples can find relative support as cash flows prove steadier. The S&P 500 may see wider dispersion inside sectors, with supply chain exposed names underperforming. We expect short-lived rallies to fade if policy signals worsen.
Tariff worries can tilt capital toward USD assets and weigh on export volumes, keeping AUD swings active. Australian miners track China growth and commodity balances more than tariffs, but sentiment still matters. For ASX investors, consider barbell exposure: quality defensives for stability and selective resource names for upside tied to metals and energy demand.
Earnings season is now ‘guidance season’
With higher yields, investors are judging 2025-2026 run-rates, not just quarterly beats. Guidance on margins, pricing power, and buybacks carries more weight. On the S&P 500, companies that defend medium-term free cash flow should outperform. Forward commentary around capex and AI spend is key for tech multiples when rates are pushing higher.
In this tape, balance sheets matter. High interest coverage, positive free cash flow, and consistent buybacks are getting a premium. Market coverage of the S&P 500’s broad losers after the steep down day highlights that leverage and earnings uncertainty are penalised most source.
Volatility tends to cluster around earnings and macro shocks. For ^GSPC, RSI sits near 57.5, ADX near 12 indicates no strong trend, and ATR near 59 points flags active ranges. The index trades near its middle Bollinger band around 6,866, with the upper near 6,980 and lower near 6,752, framing near-term risk.
Levels, scenarios, and risk controls to watch
MACD remains positive with a modest histogram, while the Money Flow Index near 66 suggests buying pressure is not extreme. Stochastics are elevated, which can precede brief pauses when macro news is sour. Together, these say momentum is intact but fragile as yields steer the day-to-day tape for the S&P 500.
Key reference levels sit near the middle band around 6,866 as a pivot, resistance near 6,980, and support near 6,752. A clean break below support opens a test of recent swing lows. If yields back off, a squeeze toward resistance is possible, but earnings guidance needs to cooperate to extend any bounce.
We prefer owning quality defensives and profitable cyclicals, trimmed with some cash for flexibility. Keep duration risk modest until yields stabilise. Consider partial USD hedging for offshore exposure. Use staged entries around support and apply stop-losses below recent swing lows. Reassess positions as earnings updates and tariff headlines evolve.
Final Thoughts
The S&P 500 is adjusting to higher-for-longer rates as the U.S. 10-year hovers near 4.29% and EU tariff risks linger. That mix tightens financial conditions and lifts equity risk premia, turning earnings season into a guidance test. For Australian investors, we see merit in quality balance sheets, steady free cash flow, and selective resource exposure. Watch momentum markers and the 6,752 to 6,980 band for near-term signals. Keep cash as optionality, hedge part of offshore exposure, and avoid crowded, high-duration trades until yields cool. Stay data-driven and let guidance and rate moves shape incremental decisions.
FAQs
Why did the S&P 500 drop after the recent rebound?
The S&P 500 sold off as the U.S. 10-year yield pushed toward 4.29%, lifting discount rates and pressuring valuations. Fresh EU tariff risks added another layer of uncertainty. With financial conditions tighter, investors shifted focus to guidance quality, margins, and 2026 cash flows, which drove broad de-risking and wider sector dispersion.
How do rising Treasury yields affect Australian portfolios?
Higher U.S. yields can weigh on global equity multiples, impact AUD moves, and lift required returns for ASX names. Banks may benefit from net interest margins, while duration-heavy tech and healthcare can lag. We suggest a tilt to quality balance sheets, some cash, and selective resources until rates stabilise and guidance improves.
What levels matter now for the S&P 500?
Near term, we watch the middle Bollinger band around 6,866 as a pivot, resistance near 6,980, and support around 6,752. A break below support risks a deeper pullback. A retreat in yields and firm guidance could fuel a squeeze toward resistance, but follow-through needs improving breadth and flows.
How should I approach earnings season volatility?
Treat this as guidance season. Prioritise firms with strong interest coverage, positive free cash flow, and credible margin outlooks. Use staged entries, keep stops below recent swing lows, and avoid oversized positions into prints. Diversify by factor, consider partial currency hedging, and reassess after each update before adding risk.
Do model forecasts still point higher for the index?
Baseline model paths indicate levels near 6,882 in one month, about 6,459 on a quarterly basis, and roughly 6,995 over a year. These are indicative, not guarantees. We would weight them against live signals from yields, earnings guidance, and breadth before leaning into any multi-month view.
Disclaimer:
The content shared by Meyka AI PTY LTD is solely for research and informational purposes. Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.
