Rising bond yields have thrown cold water on the major averages, but a few winners may emerge even if rates remain elevated. Though investors entered 2024 hoping for rate cuts from the Federal Reserve, a slew of recent economic data shows that inflation persists and consumers are still spending . These developments have spurred worries that the Fed policymakers could keep rates higher for longer. Negative investor sentiment has weighed on stocks, and all three of the major averages are down in 2024. At the same time, the 10-year Treasury yield — which influences rates on mortgages and other loans — recently crossed over the key 4% threshold after coming down from a multi-year high in October. Certain sectors are especially sensitive to moves in bond yields, and a higher rate environment could lift some stocks while denting others. CNBC Pro screened for the S & P 500 stocks with the highest and lowest 50-day correlation to the iShares 7-10 Year Treasury Bond ETF (IEF) . Bond prices and yields are inversely related, which means that as yields rise bond prices will fall. That means stocks with the highest 50-day correlation to the IEF could also see their prices fall as rates rise. Meanwhile, names with the lowest correlation to the IEF could see a boost alongside higher rates. It’s important to note that correlations don’t always hold up. Here is a list of stocks that are least correlated with the IEF. CME Group topped the list with its correlation of -0.426. Shares of the exchange group are down more than 3% this year, but they could rise if bond derivatives trading picks up. Insurance companies such as Progressive , Molina Healthcare , WR Berkley , UnitedHealth , Centene and Humana also made the list. Generally, insurers benefit when interest rates rise , since their investment portfolios will generate more yield. Earlier this month, Jefferies called out Centene as one of its top picks in the managed care space, pointing to stabilization in the company’s market share of the Florida Medicaid program. The company rates the stock a buy and has a price target of $91, which represents about 16% upside from Wednesday’s close. Centene is up 5.1% in 2024. See below for a list of stocks with the highest correlation to the IEF. Since rising interest rates directly hurt the housing market, it’s no surprise that most of the 10 stocks with the highest correlations to the IEF belong to the real estate sector. American Tower Corporation and SBA Communications top the list, having the strongest correlation of 0.574. Shares of both real estate investment trusts, which specialize in communications services, could take a hit as higher rates make their dividends less attractive. American Tower stock is down 5% so far this year, while SBA Communications has dipped 8%. Also on the list was paint and coatings manufacturer Sherwin-Williams , with a correlation of 0.536. Baird downgraded the stock earlier this month, citing a “challenging macroeconomic backdrop in the near term.” Shares of Sherwin-Williams have slid 3.5% in 2024.
Here are the stock winners and losers if rates start moving higher again
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