Rising Treasury yields appeared Tuesday to finally catch up with a previously resilient stock market, putting major indexes on track for their worst day so far of 2023.
“Yields are popping across the curve, with the 2-year back to its November highs. This time it seems, market rates are playing catch up with fed funds,” said veteran technical analyst Mark Arbeter, president of Arbeter Investments, in a note. Arbeter also noted that breadth indicators, a measure of how many stocks are participating in a rally, had previously deteriorated, with some measures reaching oversold levels.Rising yields can be a negative for stocks, increasing borrowing costs. More important, higher Treasury yields mean that the present value of future profits and cash flow are discounted more heavily. That can weigh heavily on tech and other so-called growth stocks whose valuations are based on earnings far into the future.
“While Wall Street expects resilient consumers following last week’s robust retail sales report, Home Depot and Walmart are much more cautious,” said Jose Torres, senior economist at Interactive Brokers, in a note.