US stocks fell at the open after the benchmark Treasury yield touched the highest level since 2007 ahead of a Federal Reserve interest-rate decision on Wednesday, when traders expect an increase. The S&P 500 Index declined 0.2% while the Nasdaq 100 Index dropped 0.1% at 9:36 a.m. in New York. The US 10-year yield rose four basis points to 5.03%, a rate not seen in 19 years, before retreating to 5.00%.

“Stocks now face real competition from risk-free assets,” Mark Malek, chief investment officer of Muriel Siebert & Co., wrote in a note. “After years when cash yielded almost nothing, investors can earn roughly 5% without taking equity risk, forcing stocks to justify their valuations with a larger prospective return.” Elevated borrowing costs have already put downward pressure on stock valuations, UBS Group AG analysts led by David Lefkowitz wrote in a note to clients.

“For long-term yields to rise materially from here and put further pressure on equity valuations, investors would likely have to price in an even more aggressive path for monetary policy,” they wrote. Equities have continued to generate strong returns despite higher yields because their impacts have been offset by robust earnings growth, Barclays Plc analysts led by Stefano Pascale wrote in a note. But “that balancing act may become more difficult if yields continue to rise,” they wrote.

While it makes sense to focus on the Fed, “the biggest medium-term risk to the equity outlook remains the trajectory of AI infrastructure investment,” especially since higher interest rates can increase the cost of capital, the UBS analysts wrote. Enthusiasm around risk assets is fading as investors worry about a chaotic rise in bond yields and the results of US midterm elections, according to a survey from Bank of America Corp., which found that a net 49% of fund managers are overweight global equities compared with 56% last month. Microsoft Corp. and Alphabet Inc. led the Magnificent 7 lower in early trading, while Nvidia Corp. is the only member of the cohort gaining after Jensen Huang, the chipmaker’s chief executive officer, took a live phone call from Donald Trump during a panel discussion Monday, allowing the US president to dismiss artificial intelligence dangers as a “hoax.”