Stocks are much more vulnerable to interest rate swings than they used to be.

Why it matters: A sharp rise in rates in early 2022 is the key reason the stock market is off to an ugly start. And with the Federal Reserve making noise about trying to keep inflation in check, rates could go higher.

By the numbers: The most widely watched gauge of interest rates, the yield on the 10-year Treasury note, hit 1.87% on Tuesday, the highest since January 2020.

• Stocks are down about 4% so far this year — the worst annual start for the S&P 500 since 2016.

The big picture: Rising rates are conventionally thought to be more of a threat to bonds, than stocks. But analysts across Wall Street note that stocks have started to behave more like bonds, which fall when rates rise.

State of play: Equities' increased sensitivity to rates in the U.S. reflects the impact of tech companies.

• Tech stocks tend to be more vulnerable to swings in interest rates because they have high price-to-earnings ratios and typically pay little in the way of dividends.
• The growing market weight of Big Tech in indexes like the S&P have tied the fate of the markets to these rate-sensitive giants. (Apple, Alphabet, Microsoft and Tesla generated over 25% of the total return stock market investors reaped last year.)

Go deeper: The term of art that describes such sensitivity to interest rates is "duration."

• Duration is expressed in years — in theory, it's based on how many years worth of dividend payments it would take for investors to recoup their investment.
• Don't let that throw you. Duration is also a thumbnail sketch of how much Wall Street analysts think the price of an investment would fall, or rise, if benchmark yields moved by 1 percentage point. (More here.)
• For example: If an investment has a duration of 10 years, its price would be expected to fall 10%, for every 1% increase in rates.

The intrigue: The duration of the S&P 500 jumped to nearly 37 years as of the end of 2021, according to BofA Global Research (check out the chart below).

• That means a 1 percentage-point increase in rates would be expected to send stocks down nearly 37% — wiping out the gains of the last year and a half.

Yes, but: It's important to keep in mind that these predictions are estimates based on Wall Street models, which have a notoriously loose relationship to reality.

• Besides, no one expects benchmark yields to rise that much any time soon. The consensus expectation is that the 10-year note will yield about 2% at the end of 2022, according to FactSet data.

On the other hand, recent history shows that the market has clearly wobbled in the face of higher rates.

• In mid-2015, long-term Treasury yields spiked roughly 0.25 percentage points, and the S&P shed as much as 11% over the next 12 months. (That's actually a more severe sell-off than the duration model would have predicted.)

The bottom line: At least for now, the direction of the stock market largely depends on the path of rates.