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Yield-fueled Drop Continues

U.S. stocks continued trading lower Monday, as traders keep their eyes on rapidly rising interest rates, and corporate earnings from some of the biggest banks and financial institutions this week. Higher yields means steeper borrowing costs for companies and investors alike, and has cause for reassessing equity valuations, which were already seeming lofty to many investors as-is. Better rates for ‘risk-free’ bonds has the potential to compete against equities, which are much riskier by comparison. However, rising rates do come against a backdrop of an improving domestic economy, with the U.S. unemployment rate reaching its lowest level since 1969 among a number of other metrics in the previous weeks that have strengthened the notion that the U.S. economic recovery and expansion has continued.

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