Treasuries Rise on Easing Fed Hike Worries as Powell Comments
Market Volatility Eases as Powell's Comments Calm Rate Cut Fears
The US Treasury market bounced back from a sharp decline, trimming what is expected to be its worst monthly selloff since 2024. Traders had been betting on a rate cut in 2026 due to concerns over the economic fallout of the war in Iran, but Federal Reserve Chair Jerome Powell eased fears by stating that longer-term inflation expectations appear to be in check.
Powell's comments, made during an event at Harvard University, suggested that officials may need to respond to the impact from the conflict, but it is not the case yet. The S&P 500 fell 0.4% as a rout in chipmakers offset gains in most major groups, while US oil prices topped $100 per barrel.
Inflation Expectations 'Well Anchored' Beyond Short Term
Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
Powell stated that inflation expectations seem to be "well anchored beyond the short term," indicating a reduced likelihood of an imminent rate hike. This shift in sentiment has led traders to erase their wagers on a rate hike, with the probability of one or more cuts being higher than the probability of a hike.
The war in the Middle East has upended global markets, triggering concerns about a simultaneous spike in inflation and slowdown in economic growth. The conflict has severed a crucial route for energy supplies, boosting oil prices and driving stocks toward their worst month since 2022.
Market Volatility to Continue
The White House has threatened further escalation of attacks on Iran, including critical civilian energy infrastructure, as the fifth week of war shows little sign of a letup. President Donald Trump's recent statement on social media has added to the market's volatility, with investors remaining cautious.
Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline
| Index | Change |
|---|---|
| S&P 500 | -0.4% |
| Nasdaq 100 | -0.8% |
| Dow Jones Industrial Average | +0.1% |
Corporate Highlights
Morgan Stanley's E*Trade unit is in talks with SpaceX to lead the sale of IPO shares to small investors, potentially being favored over rival brokerage platforms from Robinhood Markets Inc. and SoFi Technologies Inc. Fannie Mae and Freddie Mac pared a months-long slide after Bill Ackman called the mortgage-finance giants "stupidly cheap." Sysco Corp. is acquiring Jetro Restaurant Depot LLC for $29.1 billion, including debt, in a deal that will create one of the largest food-service groups in the US.
Market Performance
| Asset Class | Change |
|---|---|
| S&P 500 | -0.4% |
| Nasdaq 100 | -0.8% |
| Dow Jones Industrial Average | +0.1% |
| Bloomberg Dollar Spot Index | +0.3% |
| Euro | -0.4% to $1.1459 |
| British pound | -0.6% to $1.3185 |
| Japanese yen | +0.4% to 159.71 per dollar |
| Bitcoin | little changed at $66,496.76 |
| Ether | +1.1% to $2,023.02 |
| 10-year Treasury yield | -9 basis points to 4.34% |
| Germany's 10-year yield | -6 basis points to 3.04% |
| Britain's 10-year yield | -4 basis points to 4.93% |
| West Texas Intermediate crude | +4.6% to $104.18 a barrel |
| Spot gold | +0.5% to $4,516.16 an ounce |
The first-quarter earnings season in mid-April will be key for providing clarity on the outlook and the impact of the Middle East conflict. Goldman Sachs Group Inc. strategists expect S&P 500 earnings to grow at a solid 12% this year, barring a severely prolonged disruption.
Investor Takeaway
Investors may see a potential rate cut in 2026 as inflation expectations appear to be in check.
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