Wall St Week Ahead Surging Treasury yields upend stock market's 'bond proxies'

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Soaring Treasury yields have stunned the U.S. equity market in recent weeks, with some of the worst fallout hitting a group of stocks expected to have bond-like qualities.

The S&P 500 is down about 4% since the Federal Reserve's hawkish interest rate projections last month sent U.S. yields to 16-year peaks and accelerated an equities pullback from highs reached in late July.

But surging bond yields have dulled the appeal of bond proxies. Investors can now earn higher yields on government debt seen as virtually risk free if held to term. The yield on a six-month Treasury now stands at around 5.6%, while the utilities sector was yielding 4% and staples yielded 3%, according to LSEG data.

Next week also kicks off third-quarter earnings results for U.S. companies, with several major banks reporting. The earnings season could determine the near-term path for stocks, with the S&P 500 still logging a 10% gain for the year even after its pullback.

 

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