Interest rates surged on Friday after the Non Farm Payrolls Report showed more jobs added in July than expected. The 10 year yield jumped over 10%. Based on the 10 year yield chart, interest rates are headed higher. The first target is 1.7%, the second target is 1.75%. These levels will likely be hit in the coming week.

What Does It Mean For The Stock Market?

There are only two things at this point that can hurt the market in the near term. The first is a black swan event. Black swan events are something unexpected that hits the stock market. For example a China stock market crash or major terror event. The other issue that could cause a stock market fall is interest rates surging. Why? Artificially low interest rates induced by the Federal Reserve are the main reason why the stock market is at all-time highs.

 Investors look at the yield they can make in bonds and would rather take on a little risk by investing in stocks in hopes they can make a better return. However, if interest rates start to climb that will change. There will be a tipping point where the yield in bonds becomes more attractive and money starts to flow out of stocks and into bonds. What level will that be? The likely level where the market will get shaky is 2% on the 10 year yield. If yields continue to surge near that level this week, watch for money flow to change direction and the stock market begin to fall.

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By Pro-Trader