Economists and market strategists generally agree that higher rates hurt stocks in three key ways.

Inflation would hurt stocks, bonds and the value of the dollar.

The combination, he said, was helping the bond market but hurting stocks.

For example, he said, Japanese monetary authorities have kept interest rates high to fight inflation, although this policy has hurt stocks.

Commodity prices were up slightly, which also might have hurt stocks.

But in the short run, rising inflation can hurt stocks by squeezing profit margins.

The pessimism has begun to hurt local stocks, which slipped 0.2 percent today.

The traditional view is that rising interest rates hurt banks and financial stocks.

Higher inflation could undermine the current environment of low interest rates, a development that would hurt stocks domestically and overseas.

And any war in Iraq, he said, could hurt travel-related stocks.