Stock Gains May Be Cut Short If Bond Yield Rises

Stocks could be swept higher in a Santa rally, but traders are watching out for a potential party pooper.

“Beware of the bond market,” said Mark Luschini, chief investment strategist at Janney Montgomery.

Treasury yields have the potential to act as a trip wire for stocks. When the 10-year edged to 3 percent earlier this year, the stock market was shaken. With the Fed now preparing to slow down its bond-buying, yields have been moving higher again, and better economic news is also a catalyst.

Stronger-than-expected consumer spending, up 0.5 percent in November, and surprisingly good durable goods, up 3.5 percent, helped drive the 10-year yield to 2.987 percent Tuesday, its highest level since Sept. 6, when it hit 3 percent.


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Mingze Wu

Mingze Wu

Currency Analyst at Market Pulse
Based in Singapore, Mingze Wu focuses on trading strategies and technical and fundamental analysis of major currency pairs. He has extensive trading experience across different asset classes and is well-versed in global market fundamentals. In addition to contributing articles to MarketPulseFX, Mingze centers on forex and macro-economic trends impacting the Asia Pacific region.
Mingze Wu