Bond Yields Continue Higher; Why Gene Munster's Bullish on Amazon

NEW YORK (TheStreet) -- After jumping higher shortly after the open on Wednesday, the S&P 500 is up a modest 0.25%. The focus remains on bonds, with yields on the 10-year Treasury bond are up a robust 4.4%. 

Financial stocks are moving higher as a result of the higher rates, Pete Najarian, co-founder of optionmonster.com and trademonster.com, said on CNBC's "Fast Money Halftime" show. 

Also as a result of higher yields, the iShares 20+ Year Treasury Bond ETF (TLT) is also down 1.5%, added Josh Brown, CEO and co-founder of Ritholtz Wealth Management. It looks like the ETF wants to test the lows it made in September, near $111, which would represent a "pretty substantial decline." 

"Stocks are relatively cheap" from a valuation perspective, given that bond yields are still so unattractive, explained Jon Najarian, co-founder of optionmonster.com and trademonster.com. 

Interest rates have been depressed for a very long time, thanks in part to global central banks pushing rates lower. Now, rates are looking to move higher than in part to the Federal Reserve, said Howard Lutnick, chairman and CEO of BGC Partners and at Cantor Fitzgerald. However, the increase will not be significant and to most Americans, it will be a "slow and steady" path of increasing rates, he said.

The recent surge in bond yields is likely reflecting the likelihood that the Federal Reserve will indeed raise interest rates this fall, said Jim Lebenthal, president of Lebenthal Asset Management. He also made the case that the global economy is in the midst of a recovery. 

Because of this global recovery, Kevin Kelly, CIO and managing partner at Recon Capital, says U.S. investors should focus more of their attention on foreign investments. The European Central Bank's quantitative easing measures are working as inflation creeps higher and interest rates move lower. 

In particular, Kelly likes German equities, which should continue to benefit from a rebound in the European economy. He also likes U.K. stocks as well. 

Jon Najarian added that a balanced portfolio consisting of U.S. stocks and foreign equities would be well-suited for many investors. Brown agreed, adding that over the long-term, a balanced portfolio helps make up for the years where certain indices (such as the S&P 500, for instance) underperform for several consecutive years.

The conversation turned to Amazon (AMZN) after Gene Munster began explaining the rationale behind his price target increase to $520 from $475. Munster, a senior analyst at Piper Jaffray, maintained his outperform rating, saying the company should continue to see increasing margins. 

He also expects the company to issues stronger-than-expected guidance when it reports its next earnings results. Munster made the case that revenues were poised to grow, as customers continue to flock to the online retailer after it invested heavily in 2014 for its same day shipping initiatives. While e-commerce has become a large market, he made the case that it's still in its infancy, represent between 6.5% to 10% of all commerce in the U.S. Over the next 10 to 20 years, that figure is poised to grow to 30%, which will bode well for Amazon as it continues to take market share. 

"Amazon is in a great position to have secular growth," Munster concluded. 

Lebenthal was less enthusiastic about Amazon, saying CEO Jeff Bezos tends to spend too much money, which will continue to weigh on margins going forward. 

Shares of Amazon have been trading well since the stock broke out in April, Brown said. Shares are up over 40% on the year and investors can continue buying the stock near the 50-day moving average, he said.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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