These stocks win when rates rise, as the 10-year yield notches significant milestone

Published Thu, Feb 10 202211:08 AM ESTUpdated Thu, Feb 10 202211:54 AM EST

U.S. rates are surging and rattling markets, but there are some stocks that can do well going forward, history shows. The U.S. 10-year Treasury yield on Thursday hit 2% for the first time since August 2019, building on its early year surge. That milestone was reached after the Labor Department said that consumer prices rose 7.5% in January, marking their biggest year-over-year increase since February 1982 . The benchmark rate started 2022 trading at around 1.5%, but expectations of tighter Federal Reserve policy have propelled it higher and put pressure on equities. The Nasdaq Composite, which is made up of a slew of tech stocks that have fallen amid the spike in rates, is down more than 8% year to date. The S & P 500 has slid about 4% in 2022, and briefly entered correction territory — down at least 10% from a record high set in January. The Dow Jones Industrial Average has fallen about 1.5% this year. However, there are some stocks that do well in a rising rate environment. To find them, CNBC Pro looked at the last five-biggest monthly moves in the 10-year Treasury yield . We then looked for S & P 500 stocks with the largest average gain during those months with big rate moves, weeding out any stock that fell more than 5% during any of those months. After that, we filtered for companies paying a dividend of more than 2%. So they offer income above the current Treasury yield. Finally, these stocks are also rated as buys by most analysts covering them, and the average price target for each name implies a 12-month upside of at least 10%. Check out the names that made our list below. CNBC Pro's list came back with a diversified list of stocks, including some in the financials, industrials and the technology sectors. The list also contains some commodity stocks. State Street rose an average of 8.2% during the last five times that interest rates surged. The stock has a 2.1 % dividend yield and is expected to rally 13% in the next 12 months, according to Wall Street. Broadcom increased an average of 7.6% in the most recent rising rate environments. The semiconductor company has a robust 2.4% dividend yield and is forecast by analysts to gain more than 14% over the next year. Aerospace and defense stock General Dynamics is another winner when interest rates rise. During the last five major periods of rate increases, the company rose more than 7% on average. Plus, General Dynamics pays a 2.2% dividend and is estimated to advance nearly 11% in the next 12 months. Baker Hughes is another standout performer when interest rates surge. The company also has a strong 5.4% average return in months that rates increase. Additionally, Wall Street sees the stock rallying nearly 18% over the next year. Baker Hughes pays a hefty 2.6% dividend. Eastman Chemical rose an average of 4.4% during the last five times that interest rates surged. The stock has a 2.3 % dividend yield and is expected to rally nearly 14% in the next 12 months, according to Wall Street. Olive Garden-parent Darden Restaurant has the highest dividend yield on CNBC Pro's list, at 2.8%. The stock advanced an average of 3% during the last five rate spikes. Plus, Wall Street expects the restaurant stock to gain more than 11% over the next year. Insurance company Everest Re Group advanced 1.2% during the last five periods of rising rates. The stock is expected to add more than 12% in the following 12 months. It also has a 2.1% dividend yield.

Traders on the floor of the NYSE, Feb. 3, 2022.

Source: NYSE

U.S. rates are surging and rattling markets, but there are some stocks that can do well going forward, history shows.