Yield quagmire is playing havoc with S&P 500 valuation models

The longer bond yields stay stuck, the jumpier the stock market seems to get. Heading into a historically volatile month, that's the heart of the dilemma facing equity investors as they try to balance divergent signals on valuations and growth.

Goldman strategists led by David Kostin are among those who consider the 10-year Treasury yield -- 1.23 percent at last check -- a key plank in a bull case for stocks. | Photo: BRENDAN MCDERMID/REUTERS / X90143

On one side is the claim that very low interest rates make stocks worth more by boosting the value of future profits. Against that is an equally plausible view that falling yields denote pessimism about the economy that make stocks less valuable in anticipation of sluggish growth.

It's resolving, for now, in a kind of herky-jerky turbulence, such as this week’s, when despite rising on three of five days the Nasdaq 100 Index ended down 1 percent.

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