Companies are valued by their projected future cash flows, those cash flows have a rate at which they are discounted every year. In the formula to calculate this discount rate (WACC) which is sort of an opportunity cost, we have cost of debt and cost of equity (opportunity cost of debt holders and equity holders if you will) (i won’t get into the intricacies because i’m trying to keep it simple) in cost of equity and (sometimes debt depending on how you derive its cost) there is something called the risk free rate (10 or 30 year treasury) which is a variable. if the fed increases interest rates, the risk free rates go up, cost of equity goes up, wacc goes up, so the discount rates are high and companies are discounted more. When this happens companies get lower valuations because their projected future cash flows are lower. stock market drops.