Rising Treasury yields tend to undermine the performance of stocks, with higher rates on government debt offering a more attractive opportunity for investors. Or so the convention thinking goes.
Moya’s view captures a period beyond Thursday’s up-and-down session. All three major stock indexes initially rallied from the open in reaction to another round of record earnings and blowout forecasts from Nvidia on Wednesday, even though 3-month BX:TMUBMUSD03M through 30-year yields BX:TMUBMUSD30Y were all higher. As trading wore on, however, the Nvidia-spawned euphoria faded as higher yields and a rising dollar DXY put pressure on equities.
Read: Will Powell crush stocks again during Friday’s Jackson Hole speech? Here’s one reason investors shouldn’t worry. The current period of higher interest rates and elevated inflation has defied expectations in a number of ways. The U.S. economy has managed to withstand more than five full percentage points of interest rate hikes since March 2022 better than many expected. American savers are getting a boost from higher rates, turning into another source of strength for the economy. And the stock market is still up for the year, even though 10- and 30-year Treasury yields are not far from multiyear highs.