What happened

September started off on a low note for stock market investors Thursday, with the S&P 500 falling 1% and the Nasdaq down twice that as of 12:05 p.m. ET. Cruise stocks failed to navigate around the storm, and Royal Caribbean (RCL 1.45%) shares are down 3.9%, followed by Norwegian Cruise Line Holdings (NCLH 2.76%) with a 4.4% loss, and Carnival (CCL 2.37%) (CUK 1.94%) bringing up the rear -- down 4.6%.

You can blame the bond market for that.

So what

As CNBC reported this morning, recent comments by Federal Reserve Chairman Jerome Powell warning of "some pain" to the economy, combined with lower unemployment numbers this morning (which could contribute to inflation, prompting even more interest rate hikes), have bond yields marching higher. For example, the 10-Year Treasury bond is approaching 3.3% after a steep run-up over the past week. The two-year Treasury just topped 3.5% -- its highest level in nearly 15 years!  

What do bond yields on government debt have to do with cruise ship stocks?

Simply this: Rising bond yields are an indication that investors think the government is going to keep raising interest rates. If they're right about that, it means that all kinds of debt are going to be more expensive to service in the future -- government debt, sure, but also debt taken out by cruise ship companies as they struggled to survive no-sail orders during the pandemic.

Now what

And cruise companies are carrying a lot of debt -- much more than they used to carry pre-pandemic.

Since the end of 2019, Carnival's long-term debt load has roughly tripled to $29.3 billion, meaning that today it's paying interest on $19.6 billion more debt than what it used to have to pay. It means for every 1% that interest rates rise, Carnival needs to earn $196 million more per year just to break even. (And with Carnival's share count up 72.5% since before the pandemic, it needs to earn closer to $338 million more per year to maintain the same level of pre-pandemic earnings per share.)

The numbers for Royal Caribbean and Norwegian Cruise look similarly grim: Royal Caribbean -- debt levels up 110% from before the pandemic, and share count up 22%; Norwegian Cruise -- debt up 103%, share count up 98%.  

Any way you look at it, these numbers mean that cruise companies are going to be a lot less profitable per share after the pandemic than they were before it. The only question is how much less, and the best answer to that question is another question: How much more will interest rates rise?