Rising Yields Threaten Stock Market Rally as Investors Favor Bonds

Stock bulls are betting the Fed will pause rate hikes as higher yields tighten conditions, but this is a risky bet as higher yields threaten valuations.

The S&P 500 hit a bear market low a year ago but has rallied over 20% since then, with some citing higher yields doing the Fed's tightening work.

With 10-year Treasury yields now equal to S&P 500 earnings yields, bonds are more attractive, drawing investors from stocks.

While higher yields reduce the need for Fed hikes, they signal worsening economic outlooks and financial conditions.

Analysts warn the view that yields ease Fed pressure is flawed as further yield rises remain a threat to equities.