The Standard & Poor’s 500 Index reached a record high on Aug. 2, and though the index has since dropped from that peak, equities remain up 15.4 percent so far this year through yesterday. Stocks rose, after a four-day drop in the S&P 500, as investors weigh retailers’ results. The S&P 500 climbed 0.2 percent to 1,648.84 at 10:19 a.m. in New York.

“You have bond yields going up, but you have the equity market doing well,” Drew Matus, deputy U.S. chief economist at UBS Securities LLC in Stamford, Connecticut, and a former analyst at the Federal Reserve Bank of New York, said in an Aug. 16 interview on Bloomberg TV.

“What does that tell you?” said Matus. “It tells you the equity markets are going up because the economy is doing well or that bond yields are going up because the economy is doing well, not necessarily because of expectations of what the Fed may or may not do.”

Withdrawing Stimulus

The rise in yields is being closely monitored by Fed officials as they gauge whether the economy is strengthening to the point that they can withdraw stimulus or whether the rise in rates threatens to derail growth by raising borrowing costs and choking off activity.

Bernanke said in Senate testimony on July 18 that the rise in interest rates had led to an “unwelcome” tightening in financial conditions. He said that better growth expectations were also behind the rise in rates and added that “a benefit” of higher rates “is that some concerns about building financial risks are mitigated in that way.”

Homebuilders, among the groups most sensitive to a jump in borrowing costs, continue to gain confidence even as rates rise. The national average 30-year fixed mortgage rate was at 4.40 percent last week compared with a record low 3.31 percent in November, according to Freddie Mac.

Builder Sentiment

The National Association of Home Builders/Wells Fargo sentiment index climbed to 59 in August, the highest since November 2005.

“People are overreacting to a little run up in interest rates,” Donald Tomnitz, the president and chief executive officer of D.R. Horton Inc., the largest U.S. homebuilder by revenue, said on a July 25 teleconference. “It may delay those purchases, but it’s not going to be a permanent effect.”