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Expand chart
Data: YCharts; Chart: Axios Visuals

A milestone was reached in the markets Thursday: The yield on the 10-year Treasury note rose to match the dividend yield on the S&P 500

Why it matters: The two yields have been inverted since the beginning of last year, which is historically unusual.

How it works: The 10-year Treasury note is a risk-free asset: If you hold it for 10 years, you know exactly how much it's going to return. Right now, that yield is 1.52%.

  • The S&P 500 dividend yield is normally lower than the risk-free rate. Investors earn less in dividends than you would holding the same amount of money in Treasury bonds, but they hope that rising stock prices will make up the difference.

Context: The Treasury yield was artificially depressed by the flight-to-quality trade during the coronavirus pandemic, as well as by large-scale purchases by the Federal Reserve. Now yields are rising on optimism that aggressive fiscal policy might reignite inflation.

The big picture: Much of the rise in the S&P 500 has been driven by high-growth technology stocks. Like all stocks, they're valued according to the net present value of their future earnings — but unlike most stocks, a very large part of today's valuation is arrived at by extrapolating earnings out by more than 10 years.

  • Those values are arrived at using what's known as a discounted cashflow calculation, where future earnings are discounted by a "discount rate." As interest rates rise, the discount rate goes up and the present value of the future earnings goes down.

The bottom line: As interest rates rise, that's naturally going to apply downward pressure to stock prices — especially when it comes to white-hot emerging tech stocks.

  • For evidence, look no further than Thursday's 2.5% drop in the S&P 500, which was led by a sell-off in tech shares — and global bonds.

Go deeper

Powell remains unbothered by inflation despite yields surging

Data: Investing.com; Chart: Axios Visuals

U.S. Treasury yields rose to fresh highs on Wednesday, as Fed chair Jerome Powell made clear during his second day of Congressional testimony that the central bank had no plans to step in and put a lid on rising rates.

By the numbers: Yields on the benchmark 10-year note rose above 1.4% for the first time since February 2020 and the yield on the 30-year Treasury bond hit 2.28%, the highest since January 2020.

DoorDash says delivery drivers are earning more after Prop. 22

Illustration: Sarah Grillo/Axios

Food delivery company DoorDash says that in January, its couriers in California netted on average 30% more in hourly earnings than they did in 2020 prior to the passage of Prop. 22 in November.

Why it matters: Much of the companies' pitch to voters was that Prop. 22 — which allowed gig economy firms to treat workers as contractors rather than employees — would translate to higher earnings for workers, but has faced skepticism from some drivers and critics of the industry.

Updated 49 mins ago - Politics & Policy

Political consultants pocket taxpayer cash

Illustration: Shoshana Gordon/Axios

Members of Congress are turning to the same political consultants who got them elected to blast out taxpayer-funded communications from their government offices, records show.

Why it matters: While those members are barred from politicking with official funds, the firms have expertise in boosting elected officials' images for political gain and are in high demand for both campaign and government work.