US Treasury yields pushed into territory unseen since before the financial crisis on Tuesday, putting a spotlight on stocks exposed to housing and expensive long-duration growth.
The 30-year Treasury yield climbed to 5.327%, its highest since 2007, while the 10-year reached 4.739%.
Oil above $90, fiscal concerns and borrowing are adding to inflation and funding worries.
Home Depot, D.R. Horton, Lennar, Tesla and Palantir are five stocks worth watching as investors test how markets absorb expensive long-term money.
Home Depot stock faces rates and earnings at once
Home Depot has the most immediate catalyst, with second-quarter results due before Tuesday’s US open. Wall Street expects $4.73 a share in earnings on $47.2 billion of revenue.
The larger issue is housing. High mortgage rates continue to suppress turnover and renovation projects, limiting the demand recovery investors have waited for.
Oppenheimer analyst Brian Nagel told Kiplinger that Home Depot and Lowe’s are managing the difficult backdrop effectively, but he sees little evidence that second-quarter results will reveal a sustained home-improvement recovery.
Tuesday’s report could show whether elevated yields are already filtering into household spending.
D.R. Horton stock gives investors a direct housing-rate test
D.R. Horton is more directly exposed because higher Treasury yields can translate into higher mortgage rates and weaker affordability.
The builder cut its revenue forecast in July as buyer incentives and higher costs pressured margins.
The wider market remains weak: August builder confidence came in at 35, while the latest mortgage rate cited by Reuters was 6.77%.
NAHB chief economist Robert Dietz told Reuters that its latest survey “continues to show signs of weakness in the home building market.” About 30% of builders were cutting prices in August.
Lennar stock: Cost of keeping buyers interested
Lennar illustrates how affordability pressure can hurt builders even when they keep selling homes.
Its second-quarter average selling price fell to $371,000 from $389,000 a year earlier, while revenue declined to $7.94 billion.
The company has relied on incentives to support demand and guided third-quarter deliveries below Wall Street expectations.
If long yields remain elevated, mortgage-rate buydowns, discounts and other incentives may become important. Those measures can defend sales volumes, but they can also squeeze profitability.
Tesla stock faces a valuation problem, not a mortgage problem
Tesla’s exposure is different. Its share price depends heavily on expectations for future businesses including robotaxis, autonomous driving, AI and robotics.
Higher risk-free yields make those distant earnings less valuable in present-value terms while making bonds more competitive with growth stocks.
Barron’s noted on August 11 that lower inflation and borrowing costs would make growth stocks such as Tesla more attractive relative to interest-bearing assets.
The reverse relationship makes Tesla a stock to watch if Tuesday’s bond selloff deepens, although vehicle demand and AI execution remain much larger company-specific drivers.
Palantir’s AI premium meets a higher hurdle rate
Palantir combines exceptional AI growth with a valuation that leaves investors paying heavily for future expansion.
Deutsche Bank analyst Brad Zelnick said after its latest results that Palantir was “operating several steps ahead of the rest of software” in turning AI demand into customer value, according to MarketWatch.
Strong fundamentals do not remove rate sensitivity. As Treasury yields rise, investors can demand a higher return for owning richly valued growth companies.
The five stocks therefore represent two different tests. Home Depot, D.R. Horton and Lennar show whether expensive money is damaging housing and household demand.
Tesla and Palantir show how much investors will pay for distant growth when long-term government debt yields more than 5%.
The 30-year yield is not an automatic sell signal, but a tougher hurdle.
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