The 10-year U.S. Treasury yield could could rise if the Federal Reserve comes off too hawkish at Wednesday’s policy meeting — and that could be bad news for stock investors, according to Piper Sandler. Michael Kantrowitz, the firm’s chief investment strategist, said Chair Jerome Powell taking a less dovish stance could push the yield toward 4.25%, which he called a “line in the sand.” Data shows that’s the level when the S & P 500 since 2023 has started producing median negative weekly returns. “With the recent backup in 10-year yields … we’re again getting questions about where equity markets might start to react negatively,” Kantrowitz wrote to clients in a Monday note. “While no level is ever exact, the past three years show that moves above ~4.25% tend to coincide with weaker equity returns and a doubling in realized equity volatility.” Here’s how the S & P 500 moves in a median week depending on the 10-year yield’s level when it’s on the rise: Kantrowitz’s data comes as investors gear up for what they’re expecting to be a “hawkish cut” from the Fed. In other words, they are expecting the central bank to lower rates, while cautioning that the market shouldn’t expect another decrease in the near future. The Fed could also signal just one rate cut in the next year. In this vein, CNBC’s Fed survey showed 87% of respondents believe the central bank will lower rates today, despite only 45% thinking it actually should. Just 35% predict another cut in January. US10Y YTD mountain The 10-year Treasury yield in 2025 The U.S. 10 Year Treasury yield ticked down nearly 2 basis points to 4.168% ahead of the Fed decision on Wednesday morning.
