Is This the Tipping Point?

 | Jul 24, 2013 | 2:40 PM EDT
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Look at Toll Brothers (TOL). The stock has become the most sensitive to rates that I know of, and it's showing that the advance in interest rates today could be a serious one.

Before we freak out, remember that the stock market can sustain higher rates. We know that because we've had a remarkable advance from the time when the 10-year note when to 2.6% from 1.6%.

But the advance doesn't take place until after rates stop going up and, judging by Toll, that means we have a little ways to come.

I pick Toll because it is right in the crosshairs of what made rates jump today -- an 8.3% increase in new homes sold in this country. That's too hot, especially when you add in that affordability is simply not as good as it was. We need inventory. We need that market to catch its breath, and that means we need rates to go higher.

We are seeing a lot of encouraging news today to all but the interest-rate crowd. Airlines are reporting amazing numbers. General Dynamics (GD) says Gulfstream orders are up 29%. We had fantastic auto numbers from Ford (F) and aerospace numbers from Boeing (BA).

But it comes with a cost: When rates go higher, we have profit-taking. Almost everything that has done well in a low-interest rate environment is being crushed today, even if it had fabulous things to say. Higher rates put a crimp on all stocks that are sensitive to them (on the days like today).

That's what's going on. The bears have to wonder if this the tipping point. Is this at last the moment when we have too much of a good thing?

Something definitely worth pondering, given the advance that we have had.

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