Rising Yields & Rally Risk: The Investment Committee's Strategy 10/14/26

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Frank Holland (0:55)

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Scott Wapner (1:00)

I'm Scott Wapner and you're listening to CNBC's Halftime Report, the podcast, the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in.

Frank Holland (1:16)

Thank you, Carl and Mike. Welcome to the Halftime Report. I am Frank Holland. I'm for the judge, Scott Wapner. Front and center at this hour. Higher Yields is a hotter than expected inflation report, raises rate hike odds and puts pressure on stocks. The Investment Committee is right here to debate the next move for your money. With me for the hour, we have Joe Terranova, Kerry Firestone, Liz Thomas and Steve Weiss will be along very shortly. Before we begin, quick check of the markets. You can see a lot of red up here. The Dow pretty close to flat, fractionally lower. The S&P down almost 1 percent. The NASDAQ Composite down one and a third percent. The NASDAQ 100 down about a similar level as well. The small caps, the Russell 2000 down over one and a half percent. We got to take a look at bond yields right now. Right now, kind of close to multi-decade highs, still a bit lower than the levels we saw just in the last two weeks. The two-year right now, 4.86. The 10-year, 5.25 and the 30-year at 5.57.

That's where we start our conversation. Joe, I'm going to turn to you.

Are these rising rates again at multi-decade highs, are they a threat to the bull market that just celebrated its fourth birthday?

Joe Terranova (2:19)

Look, I think that yesterday, to begin the show, Scott asked me a fantastic question. And what I said was, I believe this is an unhealthy market because we're relying on a very small, concentrated basket of stocks to carry us. I mean, carry us through the earning season.

Unfortunately, to Scott's question, rising yields present the challenge in terms of accessing the debt markets, to fund the build out for AI.

When Scott asked the question, he said, well, what if that ultimately becomes an impediment? I said, well, we're already here. I didn't make that up. You saw what was building over the last several days was some uncomfortable trading in the high yield market for tech companies specifically like CoreWeave. We could show CoreWeave, which is down 15% today for the equity, but you're looking at the bonds trading 80 cents on a dollar. That's troubling for one of the original Neo clouds that is so reliant on the debt market. So it's spilling over into Oracle. I think it's one of the reasons why the market is so soft today. And I think it's something that you have to give consideration to in a market environment where it's just this small group of stocks that's carrying us higher.

Frank Holland (3:41)

Yeah, the concentration risk is something a lot of people put notes about. We're going to get more on tech coming up just a bit later in the show. But Carrie, I want to ask you the same question.

Is this a race situation? Is this a threat to the bull market again? Four years strong as of right now?

Kerry Firestone (3:54)

Well, it's not clear, Frank, that it's a threat to the bull market if you're looking over a long period of time. But let's just look at what's happened since the end of March. Just since the end of March, so we're looking at seven months, six and a half months. We've got a couple of charts here.

The S&P's up 19 and a half percent. This is when we had a five percent drawdown because of the price of oil, the war, some fears about AI and valuations. Market came down five percent. Market's up 19 and a half percent since then. And if you look at what's happened with some of these stocks, the low of the MAG babies, Alphabet up 34 percent, sorry, 30 percent Apple, 34 percent. They're all up in the 30 to 40 plus percent range. So we've had a tremendous move in technology and the S&P as a whole, in many parts of the S&P. Now recently, that's been weaker. So let's not look at this as anything other than we've got high inflation, we've got higher rates. Yes, the market has had this enormous run. Maybe we're a little ahead of ourselves. There should be some reaction to the market because of interest rates. And if it were to come in 5% to 10%, that would be healthy, in our opinion.