Stocks and Bonds Fall as Fed Split Amid War Risks: Markets Wrap
(Bloomberg) — Stocks joined bonds lower as a divided Federal Reserve held interest rates steady and signaled the war in Iran is clouding the economic outlook. Brent crude hit the highest since 2022.
With no end in sight to the Middle East conflict, money markets all but abandoned wagers on a rate cut this year and began pricing in the chances of a hike in 2027. Treasury 10-year yields rose to a one-month high, hitting 4.4%. Most shares in the S&P 500 fell, but tech firms outperformed ahead of results from Alphabet Inc., Amazon.com Inc., Meta Platforms Inc. and Microsoft Corp.
Fed officials tweaked their statement, saying “developments in the Middle East are contributing to a high level of uncertainty about the economic outlook.” They previously said the implications of the conflict on the economy were uncertain. Officials repeated the phrase referring to “the extent and timing of additional adjustments” to rates.
The latest policy gathering also revealed a deepening division over the outlook for policy amid increased uncertainty caused by the war.
Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan “supported maintaining the target range for the federal funds rate but did not support inclusion of an easing bias in the statement at this time,” the committee said. Governor Stephen Miran dissented in favor of a quarter-point reduction in rates.
“The language around elevated inflation has the fingerprints of the hawks all over it,” said Brian Jacobsen at Annex Wealth Management. “Inflation isn’t elevated solely because of high energy prices, meaning some Fed officials think a rate hike might cure what ails inflation, even if it means making the labor market sick.”
The meeting was Jerome Powell’s last at the helm of the central bank after the Justice Department dropped a controversial criminal investigation into the Fed, clearing the way for the Senate confirmation of Kevin Warsh as the next chair. Powell said he’ll remain at the central bank as a governor after his term as chair ends.
“In a dramatic twist for Chair Powell, three regional presidents dissented, not over the rate decision itself, but over how it was communicated,” said Jeffrey Roach at LPL Financial. “Expect additional tension as a new Fed chair attempts to implement a new policy regime.”
Roach says it’s no surprise that potential rate hikes are priced back in the futures markets.
“Ultimately, uncertainty will remain until the Middle East conflict is decidedly over,” he said.
Corporate Highlights:
Shares of Bill Ackman’s Pershing Square USA Ltd. opened below their IPO price, after the combined initial public offering for the closed-end fund and his alternative asset manager raised $5 billion. Seagate Technology Holdings Plc gave a fourth-quarter forecast that was much stronger than expected. It also reported third-quarter results that beat expectations. Robinhood Markets Inc. reported net revenue for the first quarter that missed the average analyst estimate. Avis Budget Group Inc. reported a worse-than-expected quarterly loss the morning after a major investor revealed it sold a portion of its stake, sending shares on a roller coaster ride to start the day’s trading. Visa Inc. climbed as the company posted what analysts called “one of the cleanest” quarters in years. Starbucks Corp. reported better-than-expected results and said it now sees comparable sales rising at least 5% this year, up from its previous view of 3% or more. Booking Holdings Inc. cut its outlook for the full year as travel demand suffers from the conflict in the Middle East.
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.4% as of 2:46 p.m. New York time The Nasdaq 100 rose 0.1% The Dow Jones Industrial Average fell 0.8% The MSCI World Index fell 0.5% Currencies
The Bloomberg Dollar Spot Index rose 0.4% The euro fell 0.4% to $1.1664 The British pound fell 0.4% to $1.3461 The Japanese yen fell 0.5% to 160.41 per dollar Cryptocurrencies
Bitcoin fell 1.5% to $75,297.57 Ether fell 3% to $2,225.81 Bonds
The yield on 10-year Treasuries advanced eight basis points to 4.43% Germany’s 10-year yield advanced four basis points to 3.11% Britain’s 10-year yield advanced seven basis points to 5.07% The yield on 2-year Treasuries advanced 11 basis points to 3.94% The yield on 30-year Treasuries advanced six basis points to 4.99% Commodities
West Texas Intermediate crude rose 7.3% to $107.27 a barrel Spot gold fell 1.6% to $4,523.28 an ounce ©2026 Bloomberg L.P.
