Here's what is keeping stocks from completely crashing with the 10-year above 3%
Yields on 10-year Treasury notes broke through 3% on Tuesday for the first time since 2014. The rise in the 10-year yield has the potential to dampen spending as consumers and companies spend more to service their debt. Stock prices dropped Tuesday as this closely watched 3% threshold was breached.
According to Fidelity Investment director of global macro Jurrien Timmer, the market's reaction could have been a lot worse if earnings growth wasn't booming.
Jurrien Timmer sat down with Business Insider's Sara Silverstein two weeks ago to talk about his outlook for equities. Timmer sees a lot of pressures on valuations ahead including tightening financial conditions. He has said that there is a sweet spot where valuations can compress and stock prices still rise if earnings growth is strong enough. During that interview here's what he said he would be watching for this earnings season.
And now, well into the earnings season we are seeing companies deliver on those high year-over-year earnings growth estimates. In this chart posted by Timmer you can see the EPS growth estimates for the past four quarters drifted lower in the weeks before the companies start reporting. The estimates for the first and second quarter this year have drifted higher and then have been solidly in the very high teens.