Bond Rally Gains Steam on Strong $22 Billion Sale: Markets Wrap

(Bloomberg) — A solid sale of long-term Treasuries reduced fears that spiraling deficits are causing investors to shun the bonds, with the market also gaining as soft inflation fueled bets the Federal Reserve will cut rates should the economy decelerate. The dollar hit a three-year low. Stocks rose.

US 30-year yields approached the 4.8% mark after the $22 billion auction. The S&P 500 closed at the highest since Feb. 20, ending at a striking distance of its all-time high. Oracle Corp. climbed to a record on a strong sales outlook. Geopolitical worries briefly weighed on equities as ABC News reported Israel is considering military action against Iran. Oil pared most of its losses.

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US inflation remained muted in May, a sign that tariffs have yet to result in higher prices for consumers and businesses. The producer price index rose 0.1% from a month earlier, compared with the median forecast in a Bloomberg survey of economists that called for a 0.2% increase.

“For the second day in a row, inflation data came in lower than expected, and this gives the Fed room to sit on their hands,” said Chris Zaccarelli at Northlight Asset Management. “As long as inflation isn’t increasing – or even better, is decreasing – the Fed can be patient and wait for more information on how the new tariffs and trade negotiations are going to impact the price stability part of their dual mandate later this year.”

As more evidence emerged of slowing inflation, President Donald Trump reiterated his complaints that the Fed has not moved quickly enough to cut rates. Trump also noted he did not plan to fire Fed Chair Jerome Powell, days after saying he would “soon” pick his nominee to lead the central bank next.

On the trade front, Trump said he may raise US auto tariffs in order to boost domestic auto manufacturing, a move that could further ratchet up tensions with trading partners. Shares of General Motors Co., Ford Motor Co. and Stellantis NV fell.

Treasury Secretary Scott Bessent said that there are a number of different assessments of the deficit impact of Republicans’ signature tax-cut bill, and that his own expectation is it will shrink borrowing over a decade.

“While stocks have rebounded and are approaching the record levels seen in February, investors may soon be wondering what could push stocks beyond that threshold,” said Rick Gardner at RGA Investments. “The next catalyst for markets may be a trade deal with China, the extension of the 2017 tax cuts and the prospect of Fed rate cuts as inflation continues to soften.”

Traders who hung on during this year’s tariff-fueled roller-coaster ride in stocks are facing a conundrum: Bonds may offer more attractive returns in coming years, according to one widely tracked measure. 

The equity risk premium, which investors use to determine the difference between expected returns on equities and US Treasuries, is hovering around its lowest point since 2002, data from Bloomberg Intelligence showed. That suggests stocks are more expensive relative to bonds than they have been for most of the last two decades, according to Bloomberg Intelligence strategists Gina Martin Adams and Michael Casper.

Ned Davis Research is the latest Wall Street firm to raise its S&P 500 target after US stocks recovered their losses from Trump’s “Liberation Day” tariffs, but admitted to the difficulty of trying to make equity market forecasts against the current macroeconomic backdrop. The firm lifted its year-end estimate for US stock benchmark to 6,350 from 5,550.

Meantime, ARK Investment Management founder Cathie Wood says corporate America is regaining its appetite for risk as expectations build around Trump’s push for deregulation and tax cuts.

Speaking on Bloomberg’s Trumponomics podcast during the Founders Forum Global conference in Oxford, Wood said major US firms are ramping up capital spending in response to a more business-friendly policy outlook. She cited Meta Platforms Inc.’s reported investment in the AI startup Scale AI as one sign of that shift.

The US stock market is back on track and within spitting distance of February’s all-time highs. Yet corporate executives are dumping shares at the fastest clip since November.

A gauge of insider sentiment, which tracks the numbers of buyers versus sellers, shows that 200 insiders bought shares this month through June 11, while 778 sold shares, according to data compiled by the Washington Service. That puts the buy to sell ratio at around 0.26, the lowest since November when Trump’s reelection triggered a months-long rally.

Corporate Highlights:

• The deadly crash of an Air India long-range aircraft on Thursday marks the first-ever complete loss of a Boeing Co. 787 Dreamliner, shining a spotlight on the US planemaker’s most advanced aircraft.
• Oracle Corp. projected cloud infrastructure sales will jump more than 70% in the fiscal year that began this month, boosting shares in late trading on investor enthusiasm for the closely watched business.
• Arm Holdings Plc Chief Executive Officer Rene Haas said that US export controls on China threaten to slow overall technological advances and are ultimately bad for consumers and companies, aligning himself with Nvidia Corp. Chief Executive Officer Jensen Huang and others looking to ease tensions between Washington and Beijing.
• A senior Trump administration official projected that Huawei Technologies Co.’s output of its Ascend AI chip will be at or below 200,000 for 2025, responding to US lawmakers’ concerns that China is gaining ground in production of advanced semiconductors.
• CoreWeave Inc.’s soaring share price is torching short sellers who are paying high prices to bet that the stock will soon fall back to earth.
• Warner Bros. Discovery Inc.’s decision to split into two independent companies is a sign of a broader “shakeout” across a media industry that has become increasingly dominated by streaming and on-demand services, Netflix Inc. co-Chief Executive Officer Greg Peters said.
• Chipmaker Micron Technology Inc. said it will spend about $200 billion on US manufacturing, research and development, the latest company to pledge large-scale investments in the country since President Trump won the election.
• GameStop Corp. plans to offer $1.75 billion worth of convertible bonds, which would make the video-game retailer one of the year’s biggest issuers of the equity-linked securities.

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.4% as of 4 p.m. New York time
• The Nasdaq 100 rose 0.2%
• The Dow Jones Industrial Average rose 0.2%
• The MSCI World Index rose 0.4%
• Bloomberg Magnificent 7 Total Return Index was little changed
• The Russell 2000 Index fell 0.4%

Currencies

• The Bloomberg Dollar Spot Index fell 0.6%
• The euro rose 0.8% to $1.1576
• The British pound rose 0.4% to $1.3602
• The Japanese yen rose 0.7% to 143.57 per dollar

Cryptocurrencies

• Bitcoin fell 1.9% to $106,873.29
• Ether fell 4.2% to $2,698.55

Bonds

• The yield on 10-year Treasuries declined seven basis points to 4.35%
• Germany’s 10-year yield declined six basis points to 2.48%
• Britain’s 10-year yield declined eight basis points to 4.48%

Commodities

• West Texas Intermediate crude was little changed
• Spot gold rose 1% to $3,388.38 an ounce

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