A series of robust economic data has recently pushed U.S. Treasury yields to rise to a months-high level, sparking investor expectations that the Federal Reserve's interest rate cut might be delayed until July or later. Simultaneously, the U.S. stock market began to feel the "chill" at the beginning of this month, with the Dow Jones Industrial Average falling nearly 400 points for the second consecutive trading day.
According to market data, the benchmark 10-year U.S. Treasury yield momentarily reached its highest level since the end of November during the trading session, closing at 4.356%, up 4.2 basis points. Yields on other U.S. Treasury maturities also rose.
This trend indicates that investors are reassessing the Federal Reserve's interest rate cut prospects, reducing their forecast for the number of rate cuts this year from three a few weeks ago to about two. The Federal Reserve has always hoped to cool the labor market by reducing job vacancies rather than direct layoffs, but the latest Bureau of Labor Statistics data shows that job vacancies remain robust, continuing the demand for labor by businesses.
The U.S. economic data has continued to perform better than market expectations, which is reflected in the rise of the Citigroup U.S. Economic Surprise Index to over 40. However, this also brought some bad news, as strong economic data could delay the Federal Reserve's interest rate cut plans, and also increase inflationary pressures.
Against this backdrop, the U.S. stock market showed a downtrend. The rise in oil prices and U.S. Treasury yields pressured the stock market, causing the S&P 500 index to fall by 0.7%, the Nasdaq index to drop by 1%, and the Dow Jones Industrial Average to fall by approximately 397 points.
Analysts suggest that as yields rise, stock market bulls might face difficulties, and the rise in crude oil prices brings additional risks to inflation prospects. Investors are closely monitoring a slew of key employment reports that are about to be released, which could make market trading more turbulent.
