How the rapid run-up in interest rates could set off a 10% to 15% correction

Traders work on the floor of the New York Stock Exchange.

Rising interest rates are rattling the stock market, and that could be the catalyst for a bigger sell-off, strategists say.

Stocks tumbled on Thursday, but the market closed off its lows. The Dow Jones Industrial Average shed 119 points, or 0.4%, and the S&P 500 was down 0.4% at 3,913. The Nasdaq closed down 0.7% at 13,865.

The 10-year Treasury yield was at 1.29% as stocks sold off, after trading as high as 1.31% earlier in the day. The yield was about 15 basis points – or 0.15% – lower in the middle of last week.

Julian Emanuel, chief equity and derivatives strategist at BTIG, said the stock market could be in the middle of a 10% to 15% correction, after the rapid run-up in interest rates that took the 10-year to fresh one-year highs.

The sell-off would have been more like 5% to 10% pre-pandemic, he said.

More In Pro Insight

CNBC ProWarren Buffett's highly anticipated annual letter arrives Saturday. Here's what to watch for
CNBC ProThese stocks will shine as bond yields rise, says Credit Suisse
CNBC ProLucid deal may be 'a gut check' in the SPAC craze and a broader market warning