A jump in the 10-year Treasury yield above 5% for the first time in almost three years added pressure to markets. The S&P 500 sits within 2.5% of its August record, leaving strategists at Wells Fargo & Co. and others debating whether equities have priced in the risks. The outlook hinges on the Federal Reserve's rate decision and Chairman Kevin Warsh's press conference.

Traders see a nearly 90% chance the Fed will lift rates Wednesday after inflation data showed consumer prices marching higher. Max Wasserman of Wealth Enhancement said a "one and done" message would relieve markets, while Ohsung Kwon at Wells Fargo warned that no hike would be bearish as the long end of the Treasury curve spikes. Andrew Graham of Jackson Square Capital sees yields above 5.10% triggering a correction.

Higher bond yields threaten equities by lowering the present value of future profits, raising corporate expenses, and pressuring margins. Stephanie Roth of Wolfe Research said bond yields need to fall for stocks to resume advancing. Tim Chubb of Girard, a Univest Wealth Division, noted the Fed would not disrupt the bull market unless hikes turn aggressive.