US Stocks Eye Best Week Since ‘23 As Bond Rout Eases: Markets Wrap

Higher bond yields, lower stocks and a weaker dollar are “driving global asset liquidation, will likely force policymakers to act,” Hartnett wrote in a note. (Image Source: Bloomberg)

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Wall Street's gyrations shook markets anew on Friday, with stocks wiping out losses to extend their best weekly gain since 2023. The rebound came after a selloff in longer-term Treasuries abated, following a few chaotic days that underscored fears foreign investors are beating a retreat from American assets.

Volatility shows little signs of easing as concerns that President Donald Trump's fast-evolving trade policy is not only shaking the global economy but threatening the US status as the world's safe haven. The S&P 500 jumped about 1.5% on a report that a Federal Reserve official said the central bank is ready to help stabilize markets, if needed. US 30-year yields dropped, while still remaining higher by 45 basis points since last Friday.

“Markets remain emotionally charged,” said Mark Hackett at Nationwide. “Markets are still searching for footing amid unresolved trade tensions, earnings uncertainty, and macroeconomic headwinds. While this week's gains are encouraging, they shouldn't be mistaken for a clear turning point.”

Not since the Covid-19 pandemic has there been this little clarity on what the outlook for economies and earnings will look like, with China unleashing retaliatory measures and the US president pausing some levies only hours after they took effect. Investors should sell any stock rallies until the US and China de-escalate the trade war and the Fed steps in, said Bank of America's Michael Hartnett.

The Fed “would absolutely be prepared” to help stabilize financial markets if conditions become disorderly, Boston Fed President Susan Collins told the Financial Times. “Markets are continuing to function well” and “we're not seeing liquidity concerns overall,” she said.

“Fed put in play. That should ease some anxiety for now,” said James St. Aubin, chief investment officer at Ocean Park. “The volatility itself is not a healthy sign. The sharp intraday rallies may seem comforting on the surface, but the whipsaws are a manifestation of overarching uncertainty.”

Friday brought a fresh signal that consumers were queasy even before Wednesday's policy shift, with a plunge in sentiment as inflation expectations soared to multi-decades highs.

With tariffs at levels now set to halt most trade between the world's biggest economies, the concern now is that the economic fight could spill into other areas. China retaliated against Trump's latest tariffs by hiking duties on all US goods, while calling the administration's actions a “joke” and saying it no longer considers them worth matching.

As China hiking duties on all American goods, shares of chipmakers with US manufacturing plummeted. Tesla Inc. stopped taking orders in China for Model S sedans and Model X sport utility vehicles — both of which are imported from the US. Meantime, JPMorgan Chase & Co.'s stock traders took in a record haul, boosted by chaotic market moves set off by policy announcements.

JPMorgan Chief Executive Officer Jamie Dimon said he expects “a kerfuffle” in the Treasury market that prompts a Federal Reserve intervention.

“There will be a kerfuffle in the Treasury markets because of all the rules and regulations,” Dimon said Friday on an earnings call. When that happens, the Fed will step in — but not until “they start to panic a little bit,” he added.

“US bond market behavior has been the most worrisome part of price action this week,” said Ajay Rajadhyaksha of Barclays Plc. “Until Treasuries stabilize and start to behave normally, risk assets will struggle, in our view.”