Bonds Gain as Cool Data Boosts Fed Rate Cut Bets – US Market Wrap

Treasuries rose after weaker-than-expected economic data fueled speculation that the Federal Reserve will lower interest rates at least twice this year to avoid a recession.

A contraction in US service providers and a slowing in hiring drove bond yields lower across the curve. Swap traders are pricing in two Fed rate cuts in October and December. The likelihood of a move in September has increased to more than 90%. The dollar weakened. The S&P 500 remained relatively unchanged, with defensive industries such as health care and communications outperforming the market.

US activity has fallen slightly in recent weeks, indicating that tariffs and increased uncertainty are reverberating throughout the economy, according to the Fed’s Beige Book. The Institute for Supply Management’s services index fell slightly below the 50-point threshold that separates expansion from contraction. Private payrolls increased the least in two years.
The jobs report due on Friday is expected to show that nonfarm payrolls slowed while the unemployment rate remained stable.