The faltering bond market received some good news on Monday, but it wasn’t enough to offset the continued rise in oil prices, which sent U.S. stocks tumbling and caused the cryptocurrency to give up most of its gains.
Speaking at Harvard University, Federal Reserve Chairman Jerome Powell said the US central bank – for now – is looking beyond short-term oil shocks and focusing on inflation expectations that remain “well anchored”.
His comments helped calm a bond market that had begun to seriously price in the possibility of an imminent Fed rate hike. The 10-year U.S. Treasury yield fell nine basis points Monday to 4.35%, and the 2-year yield slipped eight basis points to 3.83%.
The probability of one or more Fed rate hikes in 2026 fell to 5%, down from 25% on Friday, according to CME FedWatch.
Significantly up at the start of Monday, American stocks nevertheless gave up these gains, the Nasdaq closing down 0.75% and the S&P 500 down 0.4%. Bitcoin also gave up its early gains, falling back to $66,500, roughly unchanged over the past 24 hours.
The continued rise in the price of oil has hurt the sentiment of risk assets. WTI crude rose 5.3% on Monday to just under $105 a barrel. Although WTI has traded above $100 since the start of the Iran war, it has not closed above this level since 2022.
“We may end up asking the question of what to do here,” Powell said. “We’re not really facing it yet because we don’t know what the economic effects will be.”
