[U.S. Treasuries surge on inflation data; homebuilders and utilities face steepest exposure]
U.S. Treasury yields have been volatile as of late, putting certain rate-sensitive industries at risk while others hold up, market strategists and investors told CNBC. The 10-year Treasury yield has surged more than 90 basis points in 2026 and hit a 2002 high above 5.3% earlier this month. The 30-year Treasury bond yield also scaled to 24-year highs in October, briefly topping 5.7%. And while yields have pulled back from those levels, they could sail higher again as new inflation data raises questions about whether the Federal Reserve will have to raise rates further to stave off pricing pressures. On Wednesday, the Bureau of Labor Statistics reported consumer prices rose 3.7% in September on a year-over-year basis, above Wall Street’s expectations. That’s led traders to price in at least one more Fed rate hike before year-end, according to the CME Group’s FedWatch tool. Higher rates can complicate the investment outlook for several sectors — such as homebuilders and utilities. Companies in these spaces tend to have elevated debt loads and are involved in capital-intensive businesses. However, healthcare is one area of the market that is likely to remain resilient in a high-rate environment. “Equities are going to be choppy,” said Gregory Faranello, head of macro strategy at South Street Securities. “When you hit pockets like this, it pays just to take a step back and think a little bit and say, ‘what are the key risk buckets here?'” Susceptible Stocks Homebuilders are likely to suffer if Treasury yields remain elevated. In September, 38% of builders slashed their prices, up from 35% in August, as they contended with sluggish demand due to rising mortgage rates, according to the latest National Association of Home Builders /Wells Fargo Housing Market Index. The iShares U.S. Home Construction ETF (ITB) dropped 7.3% last month, as rates climbed. That marked its worst monthly performance since July, when it tumbled 9.7%. “Homebuilders is an industry that’s going to continue to get hurt by higher mortgage rates reducing the affordability of housing,” said Raymond James CIO Larry Adam. “That’s one area that will be very susceptible.” Utilities could also struggle in a higher-rate environment due to their heavy investments and relatively high debt loads, per Bill Northey, senior investment director at U.S. Bank Asset Management Group. “You have a little bit more cyclicality and higher degrees of operating leverage, so those are going to be a little bit more vulnerable to [higher rates],” Northey told CNBC. The S & P 500 utilities sector fell more than 6% in September, its biggest monthly drop since December 2024. Back then, it tumbled 8.7%. The sector is also down around 1% in 2026, while the S & P 500 has climbed 12%. Technology stocks are also poised to slide if rates continue to climb — particularly as investors raise concerns over the feasibility of the artificial intelligence data center expansion, according to Northey. AI stocks are declining as investors’ fears over the extent of technology companies’ borrowing for the AI buildout intensifies. In September, cloud stock CoreWeave stoked jitters after it sold more than $4 billion in convertible bonds. Its total debt now stands at more than $51 billion. Tech stocks and other long-duration assets with high valuations “demonstrate some degree of vulnerability,” Northey said. “When you have rapid move-in rates like we’ve seen over the course of the past six weeks, that’s where you can see some degree of influence around equity pricing.” The iShares Semiconductor ETF (SOXX) is on track to end its ninth consecutive session in the red, marking its most prolonged losing streak in years. More broadly, small caps — whether in technology or another sector — are particularly vulnerable to higher rates, according to Raymond James’ Adam. Small caps have languished in correction territory amid broader market volatility. The Russell 2000 is down more than 11% from a record high reached in August. It’s an “area that will continue to have a major headwind in front of them,” the investor said. “Roughly about 54% of their debt financing is done with short-term debt. So, a rise in interest rates really has a bigger impact on their financing.” Resilient Part Of The Market Healthcare could weather the storm better than many other stocks, however. That’s because healthcare companies demonstrate steady earnings and consistent, non-cyclical demand, according to U.S. Bank’s Northey. While he did not provide specific names, CNBC Pro screened FactSet for healthcare stocks that are well liked on the Street. Specifically, we filtered for names that were in the S & P 500 healthcare sector with buy ratings from at least 55% of analysts and upside to an average price target of 10% or more. Abbott Laboratories made the list with 65% of analysts rating the stock a buy. The average analyst target also implies upside of nearly 16% from Thursday’s close. The stock is up nearly 6% over the past three months. Boston Scientific and CVS Health also made the cut.
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