The bond market is flashing a warning that U.S. stocks could be headed for a sustained selloff as investors revisit their expectations for how far the Federal Reserve will raise its benchmark interest rate and when it might start to come down.
Since Friday, the yield on the 2-year Treasury note has surged by 36.8 basis points as of midday Tuesday in New York, according to Dow Jones Market Data. That’s the largest three-day gain since June 14. Bond yields move inversely to bond prices. “We’ve reassessed the number of hikes and also the end point of the hiking cycle has moved further out,” said Priya Misra, head of global rates strategy at TD Securities, during a phone interview with MarketWatch.
The 2-year yield was little-changed at 4.446% Tuesday, off 1 basis point on the day, according to FactSet data. It hit its highest level since late November earlier in the week, according to DJMD. While inflation has been waning for six months, wages are still rising and some on Wall Street are worried that this disinflation, which Powell cited during Wednesday’s press conference, might turn out to be transitory.
Additionally, the latest reading from the ISM service sector activity index accelerated by 6 percentage points to 55.2 in January, up from 49.2 in December. This was better than the consensus estimate of 50.4.
AI will take over .