Rising Yields Threaten Bull Run

The US stock market is facing a threat from rising Treasury yields. Economic data indicates a strong job market and robust economy, likely leading to higher interest rates.
The equity market seems to be downplaying interest rate risks, and investors are eagerly awaiting critical data to assess credit conditions and lending by banks.
Financial conditions have changed significantly since mid-March, causing long-term rates to rise and approach October highs. The 30-Year rate could surpass 4.25%, and the 10-Year rate might also reach that level.

As rates and equity prices rise, the gap between them narrows, making stocks more expensive compared to bonds. If rates reach their previous highs, stocks could become uncomfortable with their stretched valuations.

Rising oil prices could further impact rates. Last week, oil prices dipped as investors cashed in on the July rally, but global supply concerns and China’s economic troubles affected the market. The IEA believes oil demand hinges on China’s growth, potentially tightening the oil market in H2.
US WTI crude futures rose to $82.20/barrel, driven by possible output cuts from Saudi Arabia and Russia amid geopolitical tensions. Investors remain hopeful about the US economy’s resilience under controlled inflation. API’s report suggests a significant drop in US oil stocks, signaling reduced supply.

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