Yields gone wild: Trading the jobs report

A "now hiring" sign in the window of a Subway restaurant in Sarasota, Fla.
Scott Mlyn | CNBC

Interest rates surged after a better-than-expected jobs report, sending the yield on the 10-year Treasury to 2.44 percent in early trading Friday, the highest since October.

On April 3, the yield on the 10-year was just 1.80 percent, making this move the biggest two-month jump in rates since August 2013.

The jobs report raised confidence that the Federal Reserve may hike rates this year. So how should investors get in front of that move?

Using Kensho, a quantitative tool used by hedge funds, looked at what happened to stocks when long-term interest rates surged over a 30-day period. The graphic below shows which stocks had the biggest 30-day return on average and what percentage traded positively during that period.

A few trends reveal themselves from the historical stock performance displayed above. The top performers are chemicals company LyondellBasell, automaker General Motors and fashion house Ralph Lauren.

These stocks all do nicely when the economy does well, and in the past a rise in rates signified just that: a cyclical turn higher in the economy.

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Some strategists believe the latest data are signaling economic improvement once again.

"The yield curve is a valuable leading indicator as it provides a good signal of troubles coming to fore and for now it is suggesting blue skies for the U.S. economy, despite any narrative to the contrary," David Rosenberg, chief economist and strategist at Gluskin Sheff, said in a note to clients Wednesday.

Morgan Stanley makes it because the bank's profit margins improve as the difference between short-term interest rates and long-term yields widens. A pickup in trading activity triggered by the rate rise doesn't hurt commissions on the firm's bond desk either.

Here are the losing stocks, according to Kensho.

Gold shares like Newmont Mining take a hit as rising rates impact the value of bullion.

Utilities such as Southern Co, Exelon and FirstEnergy get hit as rising bond yields begin to make those stocks' big dividend yields less attractive.

(A version of this story appeared on CNBC Pro Thursday.)

Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.