The Dow Jones Industrial Average (DJINDICES:^DJI) is headed toward another record close today, up 0.74% to 16,478 with 35 minutes left in the trading day. Strong holiday shopping traffic and a 42,000-person drop in new filings for unemployment benefits last week have helped put Wall Street in a good mood.  

Lagging the market today are JPMorgan Chase (NYSE:JPM) and Goldman Sachs (NYSE:GS), which are down 0.2% and up 0.14%, respectively. One reason is that the 10-year Treasury rate climbed above 3% today, which is likely part of a long, slow rise in interest rates.

10 Year Treasury Rate Chart

10-Year Treasury Rate data by YCharts.

This is the first time the rate has been that high in more than two years, which presents both challenges and opportunities for banks going forward. On the bright side, long-term loans made with short-term borrowings or deposits will have a larger spread and create more profit for banks.

On the downside, rising rates mean there will be less appetite for borrowing from both consumers and businesses. The mortgage market may be the most affected, as we saw home sales fall earlier this year when rates began to rise. This is still a fickle housing recovery, and for that reason big banks probably wouldn't mind seeing rates stay below 3% for a while longer.

The Dow's record year continues
If the Dow's rise lasts through today's close the market will hit a record close for the 50th time this year. That's an incredible run heading into 2014, when strong economic and earnings data will have to drive the market higher.

The question for big banks is whether rising rates will put a crimp on earnings next year. That's what has investors worried today.

Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs. The Motley Fool owns shares of JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.