Treasuries Rally as Weak Data Reinforce Fed Wagers: Markets Wrap

(Bloomberg) — Treasuries rallied after weaker-than-expected economic data reinforced speculation that the Federal Reserve will cut interest rates at least twice this year to prevent an economic recession.

A contraction in US service providers and a deceleration in hiring drove bond yields down across the curve. Swap traders are pricing in two Fed reductions in October and December. The possibility of a move in September increased to over 90%. The dollar slipped. The S&P 500 was little changed, with defensive industries like health care and communications outperforming the market.

US activity fell slightly in recent weeks, indicating tariffs and elevated uncertainty are rippling across the economy, according to the Fed’s Beige Book. The Institute for Supply Management’s index of services dropped a touch below the 50 level that separates expansion and contraction. Private payrolls rose the least in two years. 

“Markets are likely to view this through the lens of disappointment on the real growth side,” said Florian Ielpo at Lombard Odier Investment Managers. “While this represents good news for the US economy in terms of potential rate relief, the improvement already priced into equities and credit spreads could be challenged by this series of weaker numbers.”

Subscribe to the Stock Movers Podcast on Apple, Spotify and other Podcast Platforms.    

The jobs report due Friday is expected to show that growth in nonfarm payrolls slowed and the unemployment rate remained steady.

Corporate Highlights:

• Dollar Tree Inc. warned investors that its second-quarter profit could be down as much as 50% from a year ago as it deals with tariff-related costs.
• Wells Fargo & Co. finally escaped a Federal Reserve asset cap that has restricted its size for more than seven years, unleashing the firm from the unprecedented punishment in a major win for Chief Executive Officer Charlie Scharf. The bank’s shares surged.
• CrowdStrike Holdings Inc. said US officials have asked for information related to the accounting of deals it’s made with some customers and said the cybersecurity firm is cooperating with the inquiry.
• Circle Internet Group Inc.’s initial public offering is likely to price above the marketed range, after fielding orders for more than 25 times the number of shares available in the upsized deal, according to people familiar with the matter.

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 0.3%
• The Dow Jones Industrial Average fell 0.2%
• The MSCI World Index rose 0.2%
• Bloomberg Magnificent 7 Total Return Index rose 0.3%
• The Russell 2000 Index fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index fell 0.4%
• The euro rose 0.4% to $1.1412
• The British pound rose 0.2% to $1.3546
• The Japanese yen rose 0.8% to 142.89 per dollar

Cryptocurrencies

• Bitcoin fell 0.8% to $104,983.01
• Ether rose 0.3% to $2,624.64

Bonds

• The yield on 10-year Treasuries declined nine basis points to 4.36%
• Germany’s 10-year yield was little changed at 2.53%
• Britain’s 10-year yield declined three basis points to 4.61%

Commodities

• West Texas Intermediate crude fell 1% to $62.78 a barrel
• Spot gold rose 0.6% to $3,373.67 an ounce

©2025 Bloomberg L.P.