US stocks fell on Monday due to concerns that a strong economy may delay an interest rate cut by the Federal Reserve, hurting the stock market. Some sectors were hit harder, such as FedEx, which lost after losing a major contract. However, the technology sector outperformed, with companies like Micron Technology gaining. Trump Media also saw a significant decline amidst financial concerns.
The Federal Reserve hinted at possible rate cuts this year, leading to a decline in Treasury yields. However, the Fed will monitor data and adjust if inflation persists or the labor market weakens. The 10-year Treasury yield is stable but could drop in the future. For now, investors see the 5-7 year Treasury bonds as offering attractive yields due to expected inflation moderation and rate cuts. The fixed income market is anticipated to remain stable.
The Federal Reserve may not cut interest rates until November or later, as forecaster Jim Bianco believes the economy is currently too strong. Despite some improvement, inflation remains high, and rising Treasury yields indicate that market expectations for a June rate cut are waning. Bianco predicts that the 10-year yield could potentially reach 5.5% this year, a level not seen in over two decades.
