Stocks Rise, Treasury Yields Fall on Federal Reserve Pause Hopes

Equities moved higher on Thursday, and Treasury yields pulled back as investors grew hopeful the Federal Reserve may leave interest rates unchanged this month.

The Dow Jones Industrial Average climbed 337 points or 0.6%, the S&P 500 rose 0.4%, and the Nasdaq Composite traded up 0.7%. The benchmark 10-year Treasury note yield last traded around 4.76%, declining after Federal Reserve Governor Christopher Waller said he would be inclined to support holding rates steady. On Wednesday, the 10-year yield hit its highest level since November 2023, climbing above 4.8%.

Bets among fed funds futures traders for a central bank rate hike in a couple of weeks fell to 50.4% after Waller's statement, down from 63.2% a day ago. Rising crude oil prices, with West Texas Intermediate crude futures trading 1% higher at $92 per barrel and Brent futures advancing 1% to above $96, have put upward pressure on Treasury yields.

US yields were already under pressure Thursday as the Japanese yen rallied against the US dollar, rising more than 1% to 156.1 yen. New York Fed President John Williams said Wednesday that rising long-term bond yields reflect a solid economy rather than inflation fears. Money markets currently assign a roughly 60% chance of a Fed rate hike this month, though this probability shifted after Waller's comments.

Treasury Undersecretary for International Affairs Erin Browne stated Tuesday that rising Japanese long-term interest rates are impacting US markets. Nigeria’s September 2051 Eurobond yield has risen above 8% due to higher US Treasury yields and persistent inflation concerns, according to Victor Ogundijo, a fixed-income analyst at CardinalStone.