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Powell’s remarks ease bond market tensions, yet oil prices climb, impacting cryptocurrencies and equities.
WTI crude oil settled above $100 per barrel for the first time since 2002.
Fed Chair Jerome Powell (Chip Somodevilla/Getty Images)
What to know:
- Both stocks and cryptocurrency values relinquished early gains despite Federal Reserve Chairman Jerome Powell alleviating concerns regarding potential upcoming rate hikes.
- Powell mentioned that the Fed is currently inclined to overlook the energy shock related to Iran and maintain steady rates.
- While bond yields decreased, oil prices continued to rise, eventually exerting pressure on both the stock market and cryptocurrencies.
On Monday, the struggling bond market received some positive news, yet it was insufficient to counteract the ongoing increase in oil prices, which caused U.S. stocks to decline and cryptocurrencies to lose most of their earlier gains.
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During remarks at Harvard University, Federal Reserve Chairman Jerome Powell indicated that the U.S. central bank is presently focusing on inflation expectations that remain “well anchored,” while temporarily overlooking short-term shocks in oil prices.
His statements contributed to stabilizing a bond market that had started to significantly factor in the likelihood of an imminent Fed rate hike. The yield on the U.S. 10-year Treasury dropped nine basis points on Monday to 4.35%, while the yield on the 2-year Treasury fell eight basis points to 3.83%.
The probability of one or more Fed rate increases in 2026 decreased to 5% from 25% on Friday, as reported by CME FedWatch.
U.S. stocks, which were considerably higher earlier on Monday, ultimately surrendered those gains, with the Nasdaq closing down by 0.75% and the S&P 500 down by 0.4%. Bitcoin also retraced its early gains, dropping back to $66,500, which is approximately unchanged over the last 24 hours.
The continued increase in oil prices negatively affected sentiment towards risk assets. WTI crude advanced 5.3% on Monday, nearing $105 per barrel. Although WTI has traded above $100 since the onset of the Iran conflict, it had not closed above that mark since 2022.
“We will eventually maybe face the question of what to do here," Powell remarked. "We’re not really facing it yet because we don’t know what the economic effects will be."
