Treasury yields are putting pressure on stocks again

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

American markets start the year in the red
US stocks started the year on a downbeat mood, with all major diving indices on Thursday, giving up early gains. U US dollar index it hit its highest level in more than two years. The pan-European Stoxx 600 index adjusted 0.6%, announcing losses early. Oil and gas stocks led the gains, up 2.3%, although Europe’s banking index lost 0.3%.

Tesla delivers upside earnings
Actions of Tesla slumped 6.1% after the company said total shipments in the fourth quarter of 2024 fell year on year. Not only was it Tesla’s first annual drop in shipments, the figure was also below expectations, according to a consensus estimate compiled by StreetAccount. Delivery is the closest approximation of Tesla’s reported sales.

Meta’s new president for global business
Meta is replacing its global business president Nick Clegg, a former British deputy prime minister, with Joel Kaplan, the company’s current vice president of policy and a former Republican Party staffer. It’s a sign of how tech companies are they position themselves for the incoming administration of US President-elect Donald Trump in Washington.

Russia’s gas stops flowing
Ukraine stopped the flow of Russian gas to several European countries on New Year’s Day a move widely expectedRussia’s state-owned energy giant Gazprom confirmed on wednesday The European Commission he said he had worked to ensure that the 27-nation bloc was prepared for such a scenario – although some countries are more at risk than others.

[PRO] Feeling close to the level of euphoria
Investor optimism has only grown despite a tough end to December. A barometer drawn by Bank of America indicates that investor sentiment is close to the level of euphoria – but this is, on the contrary, a signal to sell. Savita Subramanian, the bank’s equity and quantitative strategist, explains what it means for investors.

U Dow Jones Industrial Average withdrawal 0.36%, the S&P 500 fell 0.22% and the Nasdaq Composite lost 0.16%. Its loss on Thursday means the S&P and Nasdaq have closed lower for five straight sessions, their longest losing streak since April.

The likely culprit? Rising Treasury yields. After initially diving, the 10-year Treasury yield began to climb and, at 12 pm US time, was close to touching 4.6%. That coincided with the time stocks began to decline: The S&P 500 lost about 60 points between 12 pm and 1 pm.

Although the 10-year yield eventually broke down at the end of the day, persistently high yields are a threat to stocks because they represent a safer avenue where investors can stash their money. When Treasurys can give a guaranteed yield of 4.6%, the risk of betting on stocks seems less attractive.

Treasurys could be even more attractive this year because analysts do not expect the S&P to return close to its 23.31% growth in 2024. It is more likely to gain 9% in 2025, on a median basis, according to u CNBC Market Strategist Survey released in December.

Against this backdrop, stocks may not adequately compensate investors for the risk they take on in owning bonds.

As Max Kettner, HSBC The chief multi-asset strategist wrote in a note on Thursday: “Hawkish pivot from the Fed will cause a further increase in yields, triggering what we call the Danger Zone.”

That said, Kettner thinks the market’s move right now “should create attractive entry points as the fundamentals are still on a solid footing – we think [the first half of 2025] it will bring a backdrop of golden curls of its own.”

Even a highway to the danger zone must lead out of it to another destination eventually.

— CNBC’s Lisa Kailai Han, Sarah Min, Jesse Pound and Christina Cheddar Berk contributed to this report.