US Bonds Rally As Economic Worries Fuel Fed-Cut Bets: Markets Wrap

US Bonds climbed as concern about the economy losing steam spurred bets the Federal Reserve will have more room to cut rates.

Treasuries extended this month’s rally, with 10-year yields falling to the lowest levels in 2025. Money markets are now fully pricing in two quarter-point reductions by the Fed this year. Those policy easing bets weren’t enough to entice equity traders. That’s after a recent set of disappointing economic data fueled concern about the outlook for corporate profits amid lofty valuations.

“The market still seems more worried about growth than inflation,” said Chris Verrone at Strategas.

The S&P 500 was little changed. The Nasdaq 100 slid 0.2%. The Dow Jones Industrial Average rose 0.4%.

The yield on 10-year Treasuries sank nine basis points to 4.31%. The dollar fell 0.2%. Bitcoin tumbled below $90,000.

There’s growing “suspicion” among investors about the scope for more S&P 500 gains at a time when European and Chinese stocks are outperforming, according to Bank of America Corp. strategist Michael Hartnett.

“The longer it takes and the harder it is for the S&P to get to new highs, the doubts grow,” Hartnett said in an interview on Bloomberg Television.

He has recommended international equities over US peers this year as he expects the Magnificent Seven megacaps to wobble. While he said investors are far from pessimistic about big tech, these stocks are vulnerable to declines if the trade “doesn’t keep working.”

Asian stocks fell the most in three weeks as US President Donald Trump’s decision to go ahead with tariffs on Canada and Mexico and order curbs on Chinese investment damped risk appetite.

Shares fell across the region with some of the biggest declines in Japan, Taiwan and Hong Kong. Treasury 10-year yields dropped three basis points to 4.4% in Asia, after gold climbed to a record Monday on demand for havens. Bitcoin, seen as a so-called “Trump trade,” slipped with other crypto currencies.

Trump said tariffs scheduled to hit Canada and Mexico next month were “on time” and “moving along very rapidly” following an initial delay. Sentiment in the broader market also soured after the president told a government committee to curb Chinese spending on tech, energy and other strategic American sectors.

“There’s just so much uncertainty in the market and it’s so hard for Asian investors to know what the end game is,” Jessica Jones, head of Asia at PGIM Investments, said in a Bloomberg TV interview. “Whether it’s going to end up causing more inflation or whether it’s going to actually slow down growth — the jury is still out.”

Trump also deepened Washington’s split with its allies over Ukraine, withdrawing US condemnation of Russia’s 2022 invasion at the United Nations and among Group-of-Seven countries as he aims to end the war on terms agreeable to Moscow. 

Trump officials are also sketching out tougher versions of US semiconductor curbs. The declines are a test for Chinese technology shares after they rallied to a three-year high on optimism over DeepSeek and President Xi Jinping’s meeting with corporate leaders.

Trump officials recently met with their Japanese and Dutch counterparts about restricting Tokyo Electron Ltd. and ASML Holding NV engineers from maintaining semiconductor gear in China, according to people familiar with the matter. 

This comes after a directive set the stage for a more muscular use of the Committee on Foreign Investment in the United States, or CFIUS, a secretive panel that scrutinizes proposals by foreign entities to buy US companies or property, to thwart Chinese investment. 

“If these orders were to go into effect, there is a risk that AI supply chains could be impacted,” said Charu Chanana, chief investment strategist at Saxo Markets Pte. “However, since the inauguration, there has been several such orders from the Trump administration, but these have been directed towards gaining leverage and bargaining power in negotiations.” 

Key events this week:

• US consumer confidence, Tuesday

• Fed’s Lorie Logan, Tom Barkin, Michael Barr speak, Tuesday

• Apple shareholder meeting, Tuesday

• US new home sales, Wednesday

• Nvidia earnings, Wednesday

• Fed’s Raphael Bostic speaks, Wednesday

• Eurozone consumer confidence, Thursday

• US GDP, durable goods, initial jobless claims, Thursday

• Fed’s Jeff Schmid, Beth Hammack, Patrick Harker, Michael Barr, Michelle Bowman speak, Thursday

• Japan Tokyo CPI, industrial production, retail sales, Friday

• US PCE inflation, income and spending, Friday

• Fed’s Austan Goolsbee speaks, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 was little changed as of 9:31 a.m. New York time

• The Nasdaq 100 fell 0.2%

• The Dow Jones Industrial Average rose 0.4%

• The Stoxx Europe 600 rose 0.6%

• The MSCI World Index was little changed

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%

• The euro rose 0.3% to $1.0501

• The British pound rose 0.3% to $1.2669

• The Japanese yen rose 0.3% to 149.34 per dollar

Cryptocurrencies

• Bitcoin fell 5.6% to $88,718.98

• Ether fell 8.9% to $2,402.85

Bonds

• The yield on 10-year Treasuries declined nine basis points to 4.31%

• Germany’s 10-year yield declined one basis point to 2.46%

• Britain’s 10-year yield declined six basis points to 4.51%

Commodities

• West Texas Intermediate crude fell 0.4% to $70.40 a barrel

• Spot gold fell 0.3% to $2,942.93 an ounce