Traders reprice Fed cuts to end of year as inflation doesn’t play ball – US Market Wrap

The world’s largest bond market fell as hot inflation data fuelled bets that the Federal Reserve will have little room to cut rates this year. Oil prices fell after President Donald Trump announced that he had agreed to begin talks with Russian President Vladimir Putin to end the war in Ukraine.

Treasury 10-year yields have risen the most since December 18, when hawkish Fed signals rattled markets. Money markets adjusted their bets on US rate cuts, with the first and only reduction this year expected in December. Almost every major group in the S&P 500 fell, though the gauge recovered most of its 1.1% loss as Tesla led gains in megacaps and Meta rose for the 18th straight session. For the first time since November, the Nasdaq 100 reversed its intraday loss of 1%.

US inflation increased significantly at the start of the year, with the monthly consumer price index rising the most since August 2023. Fed Chair Jerome Powell stated that while the central bank has made significant progress in taming inflation, there is still work to be done, “so we want to keep policy restrictive for now.”

The yield on 10-year Treasuries rose by 10 basis points to 4.64%. Bonds did not move much in response to a weak $42 billion US auction, which featured the highest coupon rate since 2007.