Stocks decline as yields remain elevated

New York: So, it looks like stocks are having a rough time lately. They dropped for the third day in a row, and Wall Street is feeling the heat. The main reason? Those pesky U.S. Treasury yields are staying high, which has investors taking profits after a pretty solid year.

All three major U.S. indexes took a hit, each down over 1%. It’s not just a few stocks either; every sector in the S&P 500 is in the red. The 10-year Treasury yield recently climbed above 4.5%, and that’s got folks worried about stock prices being too high.

One analyst pointed out that if these yields stick around, it could really drag down equity prices. Investors might prefer the safer bet of a 5% return from Treasuries instead of risking it with stocks that are at all-time highs.

The Dow dropped nearly 700 points, while the S&P 500 and Nasdaq also saw significant declines. It’s been a good year for U.S. stocks overall, with the S&P 500 up over 23%, thanks to excitement around AI and expectations of rate cuts from the Fed.

But now, with the Fed’s latest economic outlook and concerns about potential inflation from Trump’s policies, yields are climbing. Last week, the 10-year yield hit its highest level since May.

Interestingly, yields dipped a bit today after some data showed business activity in the Midwest was weaker than expected. On the flip side, pending home sales rose for the fourth month in a row, as buyers are finding better inventory despite high mortgage rates.

Globally, stocks are also feeling the pinch, with the MSCI index down but still up for the year. Trading is a bit slow as we approach the New Year holiday, and some European markets are closed.

European stocks are also down, with the German bund yield near six-week highs. The STOXX 600 index is on track for its first decline after three days of gains.

Investors are also keeping an eye on potential tax cuts from Trump, which could lead to more government spending. The yield on the 10-year notes fell slightly today, but the dollar is gaining strength against other currencies.

Crude oil prices are up a bit, too, with U.S. crude rising to $71.19 a barrel. So, it’s a mixed bag out there, but definitely a lot to keep an eye on as we head into the new year.