Stock prices look "extraordinarily vulnerable" if the recent uptick in long-term U.S. Treasury yields turns out to be a turning point for government bonds, Peter Boockvar, chief market analyst at The Lindsey Group, said Monday.
Markets remained under pressure after selling off on Friday following hawkish comments on interest rates from Boston Federal Reserve President Eric Rosengren and the announcement of a surprise speech by Fed Governor Lael Brainard, a noted dove. Investors fear the Fed could be deploying Brainard to signal it will raise interest rates at its policy-setting committee next week.
But Boockvar said the most noteworthy development in the last few days has been the rise of the 10-year U.S. Treasury yield to about 1.63 percent. The 52-week low is 1.36 percent.
In Boockvar's view, the U.S. 10-year is being dragged higher by rising Japanese and British bond yields as central bankers acknowledge their policies are limited or are having adverse effects on their economies. That is a problem for stocks because low returns in the bond market have sent investors piling into equities, pushing up valuations, he said on CNBC's "Squawk Box."
"If this is the beginning of a real move in longer-end bond yields, and central bankers, which have tried to suppress long-term interest rates, start to lose that ability, then yes, the stock market is extraordinarily vulnerable because of the valuations that have been created," he said.
Weak corporate earnings and tepid economic growth will become more serious concerns if long-term interest rates start to rise, he added.
Stifel Nicolaus portfolio manager Chad Morganlander said Monday the rise in bond yields in Europe and Japan is not enough to derail U.S. markets.
He acknowledged that the European Central Bank disappointed markets last week by declining to launch additional monetary policy stimulus, but said central banks are likely to signal rates will be more accommodative in the next six to 12 months.
"At this juncture they scotched the financial system a bit. They're taking a little bit off that speculative fervor, and I believe they're going to come back in," he told CNBC's "Worldwide Exchange."
For that reason, Stifel Nicolaus would not be "overly pessimistic" on stocks, he said.