Bond Yields Climb on Powell’s Wait-and-See Signals: Markets Wrap

This content was published on February 11, 2025 - 22:19

7 minutes

(Bloomberg) — Treasury yields rose and stocks fluctuated as Federal Reserve Chair Jerome Powell reiterated the central bank is in no rush to cut rates.

Bonds fell across the curve, with money markets continuing to fully price in just one rate cut by the Fed this year. The S&P 500 remained stuck in a tight range. Most big techs dropped, though Meta Platforms Inc. climbed for a 17th consecutive day. Intel Corp. and GlobalFoundries Inc. surged as Vice President JD Vance said the US will make sure the most sophisticated artificial-intelligence hardware is made domestically.

Just a day ahead of a key inflation reading, Powell signaled that officials will be patient before lowering borrowing costs further as the economy remains strong. He also told Congress it is unwise to speculate on tariff policy at this time. Powell is due to testify before the House Financial Services Committee on Wednesday.

To Krishna Guha at Evercore, the Fed is taking an “extended time-out on rates,” but remains oriented towards lowering borrowing costs further if and when there is further sustained inflation progress.

The S&P 500 was little changed. With a high-low range sitting below 0.6% for two days in a row, the gauge was mired in a stretch of tight trading not seen since mid-December. The Nasdaq 100 dropped 0.3%. The Dow Jones Industrial Average rose 0.3%.

“The stock market has been stuck in a sideways range,” said Matt Maley at Miller Tabak. “Despite the narrative on Wall Street, the market is not broadening out to the degree that some people are trying to portray. So, until we break out of this range, investors will want to remain nimble.”

The yield on 10-year Treasuries advanced four basis points to 4.54%. The Bloomberg Dollar Spot Index lost 0.3%.

US inflation showed scant signs of downward momentum at the start of the year, while healthy job growth undergirded the economy, backing the Fed’s stance to hold the line on interest rates for now.

Shortly before the second half of Powell’s two-day testimony marathon, a report is forecast to show the consumer price index excluding food and energy rose 0.3% in January for the fifth time in the last six months.

Compared with a year earlier, core CPI is forecast to have risen 3.1%. While marginally lower than than the annual figure for December, that’s just a 0.2 percentage point decline from the middle of last year.

“Recent inflation prints, coupled with a strong jobs market will allow patience from the Federal Reserve who will likely hold policy at its target range of 4.25%-4.50% in March,” said Josh Hirt at Vanguard.

A survey conducted by 22V Research shows 41% of respondents expect the market reaction to CPI to be “risk-off,” 31% said “risk-on” and 28% “mixed/negligible.”

In addition, 37% of investors surveyed by 22V believe that financial conditions need to tighten.

“This value has come down significantly since last month,” said Dennis DeBusschere at 22V. “59% believe that core CPI is on a Fed friendly glide path without a significant tightening of financial conditions, and 4% think there will be a recession.”

“The volatility around this week’s inflation reading may be more limited than in the past, as the Fed will, in all likelihood, still get another handful of inflation (and jobs) reports before making any additional changes to interest rates,” said Matthew Weller at Forex.com and City Index.

That said, a pickup in price pressures could lead traders to start asking whether the Fed’s rate-cutting cycle may be completed already, complicating the path forward for a central bank that has clearly been hinting that the easing cycle isn’t done yet, he added.

Corporate Highlights:

Charles Schwab Corp. is expanding overnight trading to all of its retail clients as it seeks to capture demand from investors piling into US stocks amid elevated prices.
Lyft Inc. issued a disappointing first-quarter gross bookings outlook, following a similarly muted forecast from rival Uber Technologies Inc. citing impact from the extreme winter weather and LA wildfires.
DoorDash Inc., the largest food delivery service in the US, issued a disappointing profit outlook for the current quarter, noting “significant” investments in new types of deliveries and overseas markets.
Gilead Sciences Inc. sees 2025 earnings rising faster than Wall Street expected after a big fourth-quarter beat highlighted continued demand for its top-selling HIV medicines.
Boeing Co. delivered more jets in a month than Airbus SE for the first time in almost two years as the planemaker begins to recover from a lengthy strike and years of turmoil.
Coca-Cola Co.’s profit beat Wall Street expectations as shoppers paid higher prices for the company’s sodas, energy drinks and juices.
Shopify Inc. reported quarterly revenue that exceeded expectations, suggesting its e-commerce software solutions stood out with merchants during the busy holiday quarter.
Humana Inc. will cut membership in its Medicare Advantage plans, its biggest business, while spending to improve government quality ratings that have hurt revenue from the program.
Travelers Cos. said it expects about $1.7 billion of pretax losses from the wildfires that devastated Los Angeles last month.
DuPont de Nemours Inc.’s earnings jumped on growth in the electronics market, suggesting the conglomerate’s push to cut costs and break up into smaller, more focused businesses is paying off.
S&P Global Inc. reported fourth-quarter earnings that beat estimates as strong issuance of corporate debt bolstered the firm’s ratings business.
WK Kellogg Co. posted fourth-quarter profit that topped Wall Street’s expectations, even as the cereal maker called out challenges weighing on sales.
Marriott International Inc.’s guidance for net rooms growth in 2025 proved softer than some analysts expected.
Elliott Investment Management disclosed a more than $2.5 billion stake in oil refiner Phillips 66 and plans to push the company to sell or spin off its pipeline business.

Key events this week: