Santa Claus Rally Faces Hurdles Amid Rising Treasury Yields

U.S. stocks remained steady on Thursday as rising Treasury yields challenged expectations of a year-end 'Santa Claus rally.' Record highs earlier this year were tempered by changes in interest rate projections and a decline in growth stocks, including major tech companies like Tesla and Amazon.

Wall Street's major indices remained stable on Thursday, following a holiday lull in trading. As investors eyed the typical 'Santa Claus rally' for a year-end boost, rising U.S. Treasury yields muted potential equity gains. The benchmark 10-year Treasury yield peaked at 4.64% before slightly easing to 4.58% by the afternoon, impacting growth stocks due to increased borrowing costs.

Mega-cap technology stocks, dubbed the 'Magnificent Seven,' were largely trading in the red, with Tesla's shares dropping 2.1%, Amazon.com sliding 0.6%, and Meta Platforms declining 0.7%. "We are at an inflection point with the 10-year Treasury yield," noted George Cipolloni from Penn Mutual Asset Management, acknowledging the pressure on equity markets if yields climb further.

Despite previous record highs driven by hopes for lower interest rates and AI-driven profit enhancement, recent adjustments to rate cut projections for 2025 have led to softer stock performances. However, the markets remain in a seasonally strong period known as the 'Santa Claus rally,' characterized by factors like low liquidity and tax-loss harvesting.

(With inputs from agencies.)