Rates Impacting Financials and Small Caps

This week, there has been a lot of talk around Interest Rates, as we are breaking down below some key levels on both the 10-Year Treasury Yield and the 30-Year Treasury Yield here in the US:

We are also seeing this in other parts of the world as well:

As Frank Cappelleri pointed out in his his morning research note, this is beginning to affect a few areas of the Financials ($XLF) Sector, including Banks ($KBE) and Broker-Dealers ($IAI). None of these areas of the market have been above to make it back above the highs they saw in Q4 2018:

From a Relative Strength perspective, Banks are also breaking down through their recent lows:We have seen a lot of weakness in Small Caps lately ($RUT), and this very well could continue as the Financials sector is the largest weighted sector in the index:Andy Nyquist also pointed out the weakness of $IWM and the inability of Small Caps to recapture their respective 200-day MA:Clearly interest rates are affecting more than just bonds, as there is quite the ripple effect across multiple areas of equities as well. These moves are something we need to keep an eye on. If you are someone who follows Small Caps as a sign of underlying strength in the market, this becomes even more important.