from Marketwatch:
Escalating Treasury yields risk hitting the U.S. stock market with a one-two punch, as higher yields increase the allure of bonds as an investment alternative to equities as well as posing a potential drag on the economy.
"There are two legs to that story, both of them bad. As yields on the 10-year go higher, the more attractive that investment would be to equity investors, so there is an asset allocation argument to be made," said Art Hogan, chief market strategist at Jefferies & Co.
"And, the Fed would like to keep yields lower, or at a favorable rate to help the recovery," said Hogan.
Worries inflation could return as the recession shows signs of easing may keep investors on their toes next week. The Fed's Beige Book is due and Apple afficionados will gather in San Francisco for a developers conference. (June 5)
"Rising interest rates will probably begin putting modest valuation pressure on the equity market as the yield on the 10-year Treasury note moves above 4%," wrote Fred Dickson, chief market strategist, Davidson Companies, in a research note.
