The retreating bond market received some good news on Monday, but it was not enough to offset a continued rise in oil prices, which sent US stocks lower and crypto gave up most of its gains.
In a speech at Harvard University, Federal Reserve Chairman Jerome Powell said the U.S. central bank is — for now — looking past short-term oil price 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 chance of an imminent Fed rate hike. The US 10-year Treasury yield fell nine basis points on Monday to 4.35% and the 2-year yield fell eight basis points to 3.83%.
The odds of one or more Fed rate hikes in 2026 fell to 5% from 25% on Friday, according to CME FedWatch.
Substantially higher early Monday, U.S. stocks nevertheless gave up those gains, with the Nasdaq closing up 0.75% and the S&P 500 down 0.4%. Bitcoin also gave up early gains and retreated to $66,500, largely unchanged over the past 24 hours.
Ruining sentiment in risk assets was a continued rise in oil prices. WTI crude rose 5.3% on Monday to just $105 a barrel. While WTI has traded above $100 since the Iran war broke out, it had not closed above this level since 2022.
“We may ultimately be faced with the question of what to do here,” Powell said. “We’re not really facing that yet because we don’t know what the economic effects will be.”
