Why Rising Bond Yields Could Throw a Wrinkle in the Stock Market’s Outlook

Why Rising Bond Yields Could Throw a Wrinkle in the Stock Market’s Outlook

Tue, September 1, 2026 at 11:05 PM GMT+3 2 min read

Key Takeaways

• Bond yields are surging amid worries about stubborn inflation and rising rates as the war in Iran drags on.

• Expectations of rising rates could pressure the outlook for stocks, especially growth stocks as borrowing becomes more expensive.

The surge in bond yields isn't a good sign for stocks.

The Dow, S&P 500, and Nasdaq all lost ground Tuesday as bonds sold off, sending yields higher around the globe. The yield on the 10-year Treasury note climbed to 4.79%, its highest level since January 2025.

Driving the rise in yields has been a potent cocktail of worries about higher energy prices, stubborn inflation, rate hikes by central banks, growing government debt, and heavy borrowing to finance AI infrastructure that have chipped at investors' confidence—and may not go away so soon.

That could weigh on the outlook for the stock market, particularly shares of tech and growth companies, which are more likely to take on debt to finance new developments and could face pressure from higher borrowing costs.

"When the 10-year Treasury yield sustains gains above the 4.3% range, correlation with the S&P 500 turns negative, suggesting that stocks have struggled above this level," LPL Financial Chief Equity Strategist Jeffrey Buchbinder wrote in a note last week.

Buchbinder said the firm expects the 10-year yield to fall to the 4% to 4.5% range by the end of the year, but that "we wouldn't be surprised if yields edged a bit higher," at least in the short term, given higher energy prices, resilient economic growth, and heavy corporate debt.

Based on fed fund futures data, traders are currently pricing in a nearly 70% chance that the Federal Reserve lifts interest rates by a quarter-point at its meeting later this month, which would also lead to higher yields.

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