As bond yields rise, they are increasingly impacting the stock market, with the U.S. 10-year Treasury yield at 4.59% and the 30-year yield recently exceeding 5.19%. While the S&P 500 managed to rise, breaking a three-day losing streak, analysts warn that higher yields could hinder market progress.
Michael Kantrowitz from Piper Sandler noted that the macroeconomic environment is strengthening, but rising oil prices and interest rates have negatively affected market breadth since late February. To navigate this environment, Piper Sandler has highlighted stocks that are likely to perform well in a high-rate scenario.
Genuine Parts Company, with a 78% correlation to the 10-year Treasury yield, could outperform as consumers opt to repair vehicles rather than purchase new ones amid rising financing costs. Conagra Brands, another stock on the list, has a 75% correlation to Treasury yields and may find relief from higher yields despite facing margin pressures.
Additionally, insurers like Arch Capital Group, Cigna Group, and Everest Group are positioned to benefit as they can increase rates in a rising yield environment