US yields are challenging the S&P 500 as CPI and PPI loom

Higher US yields are starting to weigh more heavily on equities

US interest rates have moved up again after last week's stronger labour-market data, helping the dollar firm and pushing markets to delay expectations for Federal Reserve easing. According to the Spanish source, futures are now pricing the first Fed move later than before, with policy expectations shifting further into 2026.

That matters because rising bond yields are now competing more directly with the earnings yield on the S&P 500. The source notes that the index's forward earnings yield sits only modestly above the 10-year Treasury yield, while the 30-year Treasury yield is holding above key levels. In other words, equities still look expensive enough that a higher-for-longer rate backdrop could become harder to ignore.

This week's CPI and PPI data could become the next market test

The market's sensitivity to interest rates appears to be rising, and this week brings two inflation releases that could either intensify or ease that pressure. US consumer price data is due on Wednesday, followed by producer prices on Thursday.

The Spanish article highlights the risk that both releases could reinforce the message from recent labour data rather than soften it. If inflation surprises on the upside, Treasury yields may push higher again and make it harder for investors to defend current equity multiples. If the data cools instead, it could offer some relief to rate-sensitive parts of the market.

The dollar may keep benefiting if inflation stays firm

A firmer inflation backdrop would not just matter for equities. It would also support the dollar by keeping US rates elevated relative to peers. The source frames that stronger-dollar dynamic as part of the same macro tightening that is making stock investors more cautious.

That creates an important cross-market link. If inflation remains sticky, the combination of higher yields and a stronger dollar could keep risk assets under pressure, especially if investors start to question whether earnings growth can justify current valuations in the S&P 500.

Valuation pressure is building even without a full market reversal

The key point from the source is not that US equities must break down immediately, but that the margin for error is getting thinner. The more Treasury yields consolidate at elevated levels, the more investors have to compare equity risk with increasingly attractive returns in government debt.

That leaves this week's CPI and PPI reports with the potential to shape market tone beyond a single trading session. If inflation keeps running hot, the S&P 500 may have to work harder to justify its valuation. If price pressures ease, risk appetite could stabilise again - but for now, the balance has become less comfortable for equity bulls.