Bond Yields Put Pressure on Stocks as Market Breadth Stays Weak

Goldman Sachs says relief in the bond market is the clearest path to further stock gains, as the U.S. 10-year Treasury yield reached 5.25%. That was its highest level since July 2007, according to analyst Christian Mueller-Glissmann.

The bank’s risk appetite indicator has fallen since the summer, though it was unchanged last week. Mueller-Glissmann said a stronger dollar and modestly wider credit spreads weighed on the measure, with the effect amplified by rising real rates.

Equity volatility has remained relatively low even as volatility in interest rates surged. European bonds faced greater pressure amid energy and fiscal concerns, while Brent crude stayed near $100 a barrel after the U.S. rejected Iran’s seven-day ceasefire proposal.

Large-cap stocks, technology-heavy indexes such as the Nasdaq, and momentum stocks have outperformed, helped by AI. Goldman said that has widened the gap between U.S. indexes, while market breadth remains poor.