Treasury Yields Climb as Fed Split Amid War Risks: Markets Wrap
(Bloomberg) — Wall Street traders drove bonds lower and stocks wavered as a divided Federal Reserve held 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 hit a one-month high. Most shares in the S&P 500 fell. In late hours, Meta Platforms Inc. slid after boosting its spending outlook. Microsoft Corp.’s cloud growth failed to ease investors’ artificial-intelligence concerns. Alphabet Inc. climbed on solid sales.
Fed officials tweaked their statement, saying “developments in the Middle East are contributing to a high level of uncertainty about the economic outlook.” They repeated the phrase referring to “the extent and timing of additional adjustments” to rates.
The gathering also revealed a deepening division. Cleveland Fed President Beth Hammack alongside Minneapolis’ Neel Kashkari and Dallas’ 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.” Governor Stephen Miran dissented in favor of a cut.
“The three dissents on the statement’s language point to a marginally more hawkish tilt, as some officials prepare for the possibility that inflation remains higher for longer,” said Angelo Kourkafas at Edward Jones. “We expect the Fed to remain firmly on hold in the months ahead.”
Jerome Powell’s press conference was his 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.
“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. It’s no surprise that potential rate hikes are priced back in the futures markets.”
A changing of the guard at the top of the Fed isn’t going to change the central bank’s calculus, or its process, according to Ellen Zentner at Morgan Stanley Wealth Management. The current backdrop of firm economic growth, sticky inflation, and a stable jobs market doesn’t justify lower rates, she said.
“The Fed is clearly in a difficult position, coming into this year intending to cut rates over the course of 2026, but the war in Iran – and the resulting spike in oil prices – are creating an obstacle to lowering rates sooner rather than later,” said Chris Zaccarelli at Northlight Asset Management.
If the conflict de-escalates and energy prices do not bleed materially into core inflation, one to two more rate cuts in the back half of the year remain a reasonable base case, according to Jason Pride at Glenmede. However, the range of possibilities is widening, he added.
Corporate Highlights:
Amazon.com Inc.’s cloud unit posted its fastest quarterly growth in more than three years, bolstered by new data center capacity and an increasing slice of business from Anthropic and OpenAI. Still, capital spending for that effort jumped to $44.2 billion in the first quarter, exceeded analysts’ expectations, a sign that Amazon is seeing higher expenses for the build-out than anticipated. Qualcomm Inc. said it was making headway in the lucrative data center market and predicted that the China phone industry will bounce back. Ford Motor Co. boosted its full-year profit outlook, citing strong demand for high-margin pickups and SUVs that will help it overcome a sharp and unexpected rise in commodity costs. Mattel Inc. reported higher-than-expected revenue in the first quarter thanks to demand for Hot Wheels miniature cars and building sets, which helped offset lower demand for Barbie dolls and Fisher-Price preschool toys. Chipotle Mexican Grill Inc. eked out higher sales last quarter, suggesting the chain is starting to win back diners who previously balked at the rising price of its burritos. Some of the main moves in markets:
Stocks
The S&P 500 was little changed as of 4 p.m. New York time The Nasdaq 100 rose 0.6% The Dow Jones Industrial Average fell 0.6% The MSCI World Index fell 0.2% Currencies
The Bloomberg Dollar Spot Index rose 0.4% The euro fell 0.3% to $1.1673 The British pound fell 0.3% to $1.3475 The Japanese yen fell 0.5% to 160.41 per dollar Cryptocurrencies
Bitcoin fell 1.2% to $75,573.06 Ether fell 2.6% to $2,235.8 Bonds
The yield on 10-year Treasuries advanced seven basis points to 4.41% 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 10 basis points to 3.93% The yield on 30-year Treasuries advanced five basis points to 4.99% Commodities
West Texas Intermediate crude rose 8.2% to $108.11 a barrel Spot gold fell 1.1% to $4,548.22 an ounce ©2026 Bloomberg L.P.
