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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.
NYSE

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.

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