US Treasuries Rally As Weak Data Reinforce Fed Wagers: Markets Wrap

Treasuries extended this year’s surge 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 US curve. Swap traders are pricing in two Fed moves before the end of 2025, with the first reduction in either September or October. The dollar slipped. The S&P 500 edged higher, with defensive industries like health-care and communications leading the way. A gauge of big tech barely budged, with Meta Platforms Inc. up and Tesla Inc. down.

The Institute for Supply Management’s index of services dropped 1.7 points in May to 49.9 — a touch below the 50 level that separates expansion and contraction. A separate report from ADP Research showed private-sector payrolls rose just 37,000 last month, 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.”

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

• 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. shares fell after the cybersecurity company projected revenue for the current quarter that trailed estimates.

• Snowflake Inc. climbed, with analysts positive on the software company in the wake of its Summit event. UBS upgraded the stock.

• 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 rose 0.1% as of 11:59 a.m. New York time

• The Nasdaq 100 rose 0.2%

• The Dow Jones Industrial Average was little changed

• The Stoxx Europe 600 rose 0.5%

• The MSCI World Index rose 0.3%

• Bloomberg Magnificent 7 Total Return Index was little changed

• The Russell 2000 Index fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index fell 0.4%

• The euro rose 0.4% to $1.1423

• The British pound rose 0.4% to $1.3567

• The Japanese yen rose 0.7% to 142.93 per dollar

Cryptocurrencies

• Bitcoin fell 0.4% to $105,337.97

• Ether rose 2% to $2,669.24

Bonds

• The yield on 10-year Treasuries declined nine basis points to 4.37%

• 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 1.2% to $62.67 a barrel

• Spot gold rose 0.5% to $3,371.52 an ounce