Treasury Yields Fall as Powell Eases Hike Fears: Markets Wrap
(Bloomberg) — Bonds rebounded after a slide fueled by concerns over the fallout of the war in Iran, with traders resuming bets on a rate cut in 2026 as Federal Reserve Chair Jerome Powell eased fears about any imminent impacts of higher energy prices on inflation.
Treasury 10-year yields dropped the most since early February as Powell said longer-term inflation expectations appear to be in check, with traders erasing wagers on a hike. Following a slide that put the S&P 500 on the brink of a correction, the gauge fluctuated. US oil topped $100.
Inflation expectations seem to be “well anchored beyond the short term,” Powell said Monday during an event at Harvard University. He added that officials may need to respond to the impact from the conflict, but that it’s not the case yet.
“Fed chair Powell’s calm tone along with overdue market focus on the growth risks from higher-for-longer oil are helping to fuel a turn in rates pricing,” said Krishna Guha at Evercore. “The probability of one or more cuts is much higher than the probability of a hike.”
The war in the Middle East has upended global markets and triggered concern about a simultaneous spike in inflation and slowdown in economic growth. The conflict has severed a crucial route for energy supplies, boosting oil prices and driving stocks toward their worst month since 2022.
President Donald Trump threatened to destroy Iran’s energy infrastructure if no deal is reached to end the war, while also hailing talks as productive. His comments came a day after he told reporters that Tehran agreed to “most of” the 15-point proposal of ceasefire terms.
“We will probably need to see clearer signs that negotiations are building towards an agreement to maintain the positive market momentum,” said James McCann at Edward Jones.
There’s growing evidence that the selling that recently hit equities “is getting closer to its ending stages,” said Michael Wilson at Morgan Stanley, who cited the example of previous “growth scares” that were not accompanied by a recession or a rate hike.
“The equity market is less complacent on growth risks than consensus believes,” he noted
History shows most geopolitical shocks tend to have a relatively short-lived impact on the market, but without clear evidence of an endgame for the war, stocks will find it difficult to see past the current volatility, according to Chris Larkin at E*Trade from Morgan Stanley.
“The market continues to be headline-driven as the Trump Administration has delivered a variety of messages surrounding de-escalation and re-escalation of the war in Iran,” said Chris Senyek at Wolfe Research. “As such, we maintain our defensively positioned posture.”
After investors reduced exposure to US equities last week, the distribution of near-term outcomes has improved, Goldman Sachs strategists said. The first-quarter earnings season in mid-April will be key for providing clarity on the outlook and the impact of the Middle East conflict, they added.
The team led by Ben Snider expects S&P 500 earnings to grow at a solid 12% this year, barring a severely prolonged disruption.
Corporate Highlights:
Fannie Mae and Freddie Mac are clawing back part of a months-long decline after investor Bill Ackman called the mortgage finance giants “stupidly cheap.” Sysco Corp. is acquiring Jetro Restaurant Depot LLC, the closely held wholesaler founded by billionaire Nathan “Natie” Kirsh, for $29.1 billion including debt in a deal that will create one of the largest food-service groups in the US. Merck & Co.’s experimental cholesterol pill slashed levels of the artery-clogging plaque far more than older tablets in the latest study to show it may rival powerful injections for high-risk patients. US regulators have approved a high-dose version of Biogen Inc.’s drug for a rare muscle disorder, giving the company a boost as it competes with a gene therapy from Novartis AG. Some of the main moves in markets:
Stocks
The S&P 500 fell 0.1% as of 1:25 p.m. New York time The Nasdaq 100 fell 0.5% The Dow Jones Industrial Average rose 0.3% The MSCI World Index fell 0.2% Currencies
The Bloomberg Dollar Spot Index rose 0.2% The euro fell 0.4% to $1.1461 The British pound fell 0.5% to $1.3189 The Japanese yen rose 0.5% to 159.54 per dollar Cryptocurrencies
Bitcoin rose 0.3% to $66,763.1 Ether rose 2% to $2,041.7 Bonds
The yield on 10-year Treasuries declined nine basis points to 4.34% Germany’s 10-year yield declined six basis points to 3.04% Britain’s 10-year yield declined four basis points to 4.93% Commodities
West Texas Intermediate crude rose 3.8% to $103.46 a barrel Spot gold rose 0.8% to $4,530.10 an ounce ©2026 Bloomberg L.P.
