10-Year T-Note yields fell to a record low of 1.366% today, indicating an extreme demand for risk free assets. However, American stocks rose as well, with the Nasdaq Composite up 1.64%, its strongest performance in more than a week. One likely causative factor for this break in correlation is a global trend towards investment in American securities, be it stocks or risk free bonds.
Global uncertainties, especially with Brexit, and strong domestic American manufacturing and service sector activity caused a movement towards safer countries, especially the United States. Japan became a less attractive haven today as Japanese service sector sentiment weakened by 1.8 points to 41.2 for June, the worst reading since October 2014 according to Reuters.
The movement towards American securities today concentrated on basic materials (XLB) and industrials (XLI), with those sectors up 2.4% and 1.96% respectively. The outstanding performance of these sectors suggests that domestic manufacturing is strong and foreign investors want to take advantage of reliable dividends.