Treasury yields are once again putting pressure on stocks

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

US markets start the year in the red
US stocks started the year in a depressed mood, with all major indices are down on Thursday, abandoning earlier gains. The US dollar index reached the highest level in more than two years. General Europe Stoxx 600 the index added 0.6%, recover previous losses. Oil and gas stocks led the way with gains of 2.3%, although Europe’s banking index lost 0.3%.

Tesla shipments offset growth
Actions Tesla fell 6.1% after the company reported that total shipments in the fourth quarter of 2024 filed from year to year. Not only was it Tesla’s first annual drop in deliveries, but the number also came in below expectations, according to consensus estimates compiled by StreetAccount. Shipments are the closest sales figures reported by Tesla.

Metta’s new president for global affairs
Meta is replacing its president of global affairs, Nick Clegg, a former UK deputy prime minister, with Joel Kaplan, the company’s current vice president of policy and a former GOP staffer. It’s a sign of how tech companies are positioning myself for the incoming administration of US President-elect Donald Trump in Washington.

Russian gas stops flowing
Ukraine stopped supplying Russian gas to a number of European countries on New Year’s Day a widely anticipated moveRussian state-owned energy giant Gazprom. confirmed on Wednesday. European Commission said it has worked to ensure that the 27-nation bloc is prepared for such a scenario – although some countries are more at risk than others.

(PRO) Moods are close to the level of euphoria
Investors’ optimism only grew, despite the difficult end of December. A tracked barometer Bank of America shows that investor sentiment is close to euphoric levels – but that, on the contrary, sell signal. Savita Subramanian, the bank’s capital and quantitative strategist, explains what this means for investors.

The Dow Jones industrial index retreated 0.36%, Art S&P 500 fell by 0.22% and Nasdaq Composite lost 0.16%. Their 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? Treasury yield growth. After initial immersion, The 10-year Treasury yield began to rise and at 12 noon US time was close to 4.6%. That coincided with when stocks began to slide, with the S&P 500 down about 60 points between 12 p.m. and 1 p.m.

Although 10-year yields eventually leveled off late in the day, consistently high yields pose a threat to stocks because they represent a safer avenue for investors to stash their money. When Treasuries can provide a guaranteed return of 4.6%, the risk of a bet on stocks looks less attractive.

Treasuries may be even more attractive this year because analysts don’t expect the S&P to return to its 23.31% gain in 2024. According to the agency, it is more likely that it will grow by 9% in 2025 on average. CNBC survey of market strategists released in December.

Given this background, stocks may not adequately compensate investors for the risk they take on by owning bonds.

Like Max Kettner, HSBC chief multi-asset strategist wrote in a note on Thursday: “The Fed’s hawkish reversal is causing yields to rise further, triggering what we call a danger zone.”

However, Kettner believes that the current market volatility “should create attractive entry points given that the fundamentals are still on solid footing — we believe (the first half of 2025) will bring an appropriate Goldilocks backdrop.”

Even a highway that leads to a danger zone must eventually lead beyond it to another destination.

— CNBC’s Lisa Kayla Khan, Sarah Min, Jesse Pound and Christina Cheddar Burke contributed to this report.