Analysis-Rising Treasury yields pose a test for richly valued US stocks

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Rising Treasury yields could provide the latest test for a rally that has made U.S. stocks increasingly expensive while taking them to fresh record highs...

NEW YORK - Rising Treasury yields could provide the latest test for a rally that has made U.S. stocks increasingly expensive while taking them to fresh record highs.

"The fact that are breaking above a previous ceiling here is giving pause," said Chuck Carlson, chief executive officer at Horizon Investment Services. "The trend of these rates is disconcerting because you have this continued series of higher highs here that is being perpetuated today." "Bonds offer some real competition," said Ed Clissold, chief U.S. market strategist at Ned Davis Research. "So if we were to see the 10-year Treasury yield spike back towards 5% like it did last fall, stocks would probably reflect that and equity valuations would need to come down."

Stocks' reaction to rising yields could depend on whether investors continue to believe the underlying economy remains strong and inflation is continuing to cool. "Stocks can weather a lot if the earnings are there," said Carlson of Horizon Investment Services. "But if earnings don't continue to beat expectations and you've got rates now going to four-month highs, that is going to be a problem for the market." -- Donald Trump has sued two co-founders of his newly public Trump Media & Technology Group Corp., claiming they set the company up improperly and shouldn’t get any stock in it.

 

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