Treasury yields are weighing on stocks again

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the Dow Jones Industrial Average decreased by 0.36% Standard & Poor's 500 It decreased by 0.22% Nasdaq Composite Lost 0.16% Thursday's loss means that the S&P and Nasdaq have closed lower for five straight sessions, their longest losing streak since April.

Possible culprit? Treasury yields rise. After initially dipping, 10-year Treasury bond yield It started to rise, and at 12 noon US time, it was about to touch 4.6%. This coincided with the time when stocks began to decline: the S&P 500 lost about 60 points between 12 noon and 1 p.m.

Although the 10-year bond yield eventually stabilized at the end of the day, ever-higher yields pose a threat to stocks because they represent a safer way in which investors can store their money. When Treasuries can offer a guaranteed return of 4.6%, the risks of betting on stocks look less attractive.

Treasuries may be more attractive this year because analysts don't expect the S&P to return anywhere near its 23.31% high in 2024. It will likely rise 9% in 2025, on an average basis, according to CNBC Strategic Market Survey Released in December.

Given this background, stocks may not adequately compensate investors for the risks they bear in connection with owning bonds.

As Max Kettner, HSBC “The Fed’s hawkish approach is driving a further rise in yields, leading to what we call the danger zone,” the chief multi-asset strategist wrote in a note on Thursday.

However, Ketner believes the market volatility now “should create attractive entry points given that fundamentals remain on solid footing – we believe (the first half of 2025) will bring a favorable backdrop.”

Even the highway leading to the danger zone must eventually lead beyond it to another destination.

— CNBC's Lisa Kailai Hahn, Sarah Min, Jessie Pound and Christina Scheider-Burke contributed to this report.