A surge in bond yields that sent stock markets skidding from record highs this month may have ripple effects outside Wall Street, as home ownership costs rise and nest eggs shrink.
While investors felt the brunt of a slide of more than 1,000 points in the Dow in recent weeks, before it recovered most of the losses, consumers have started to feel the pinch of rises in interest rates that are closely linked to the bond market.
Banks and lenders, whose own borrowing costs have risen, are charging consumers more on mortgages, some of which are at their highest rates in four years, and other loans tied to the bond yields.
Higher yields also hurt the values of bonds, which many individual investors are exposed to through mutual funds, whether through direct investments or via assets in 401(k)s and other retirement accounts.
"We have had a significant rise in bond yields over the past few weeks. There is a risk (to consumers) if this continues," said Gregory Daco, chief economist at Oxford Economics in New York.
Even so, economists and other experts say, consumers should remain encouraged by the economy's underlying strength with signs that wages are rising.
It is unclear when bond yields will top out. The 10-year yield inched toward 3 percent this week before edging lower on Friday.
Investors await Fed Chairman Jerome Powell's remarks before Congress next week. They are keen to see if Powell will offer clues that he will stick with a gradual approach in raising interest rates, as did his predecessors Janet Yellen and Ben Bernanke, with the economy at or near full employment and with inflation seeming to be heating up.
In addition to speculation over the number of Fed rate hikes this year, investors have grown nervous over the surge in government borrowing to fund a growing budget shortfall due to last year's tax overhaul and a two-year budget agreement to raise government spending.
The Treasury Department sold $258 billion in debt this week, the second biggest ever weekly issuance, in its effort to raise more cash to fill a widening budget gap.
In perhaps the most direct hit to consumers' pocketbooks, the interest rates on fixed-rate 30-year mortgages rose to 4.40 percent this week, a level not seen since April 2014, according to home finance agency Freddie Mac.
Lofty home prices around parts of the United States have already been tough on first-time buyers, analysts said.
"It does dent their affordability. It will rob the housing market of some momentum, but it won't derail it because we still have a strong economic backdrop," said Greg McBride, chief financial analyst at Bankrate.com in Palm Beach Garden, Florida.
Data from the Mortgage Bankers Association suggested that more expensive home loans caused applications for mortgages to buy a home to fall to their lowest level in five months last week.
"It's costing a little more, but it hasn't been a stranglehold on the housing market," Oxford Economic's Daco said.
Housing activity has stayed overall solid despite higher finance costs. Home construction reached a one-year peak in January, while existing home sales unexpectedly fell last month, retreating further from an 11-year high set in November.
The other side of the household balance sheet has also been knocked around by the wild swings in stock prices and bond yields, which move inversely to their prices.
Two weeks ago, Wall Street posted its worst week in two years. Rising bond yields were blamed for the spectacular selloff in stocks along with soured bets that market volatility would stay low.
The 10-year Treasury yield hit a four-year high near 2.96 percent this week, up 0.46 percentage point since the end of 2017.
Of the some $15.3 trillion in mutual fund assets in the third quarter of 2017, 64 percent were invested in domestic and international stocks and 28 percent in bonds, Fed data showed.
"Those bond funds you thought might be safe might be showing losses now," Bankrate.com's McBride said.
U.S. investment-grade bonds have produced a 2.3 percent loss so far in 2018, according to an index compiled by Barclays and Bloomberg. That compared with a 2.4 percent gain for the S&P 500 index.
While the stock market has recovered much of its losses, investors remain jittery about the prospect of punishing losses down the road, analysts said.
Investors put $1.5 billion back into stock mutual funds and exchange-traded funds (ETFs) last week after a record $34 billion drawdown the prior week, the latest Investment Company Institute data showed.
On the other hand, they withdrew $12.1 billion from bond mutual funds and ETFs last week, marking the biggest single-week outflows since December 2015 and the first net cash drain since 2016, according to ICI data.
"In the long run, the rise in yields will be more than factored into the market. People will eventually go back into bonds perhaps at even lower yields," said Robert Tipp, chief investment strategist at PGIM Fixed Income in Newark, New Jersey.