Fed's Powell's comments sooth bond market, but oil continues rise, hitting crypto and stocks

The teetering bond market received some good news on Monday, but it wasn’t enough to offset a continued surge in oil prices, which sent U.S. stocks lower and crypto giving up most of its gains.

Speaking at Harvard University, Federal Reserve Chairman Jerome Powell said the U.S. central bank — for the moment — is looking past short-term oil price shocks and focusing on inflation expectations that remain “well anchored.”

His comments helped soothe a bond market that had begun to seriously price in the chance of an imminent Fed rate hike. The U.S. 10-year Treasury yield fell nine basis points Monday to 4.35%, and the 2-year yield slid eight basis points to 3.83%.

The odds of one or more Fed rate hikes in 2026 tumbled to 5% from 25% on Friday, according to CME FedWatch.

Sizably higher early on Monday, U.S. stocks nevertheless gave up those gains, the Nasdaq closing lower by 0.75% and the S&P 500 by 0.4%. Bitcoin BTC$66,602.67 also gave up early gains, retreating back to $66,500, roughly unchanged over the past 24 hours.

Hurting sentiment in risk assets was a continued rise in the price of oil. WTI crude rose 5.3% on Monday to just shy of $105 per barrel. While WTI has traded above $100 since the Iran war broke out, it hadn’t closed above that level since 2022.

“We will eventually maybe face the question of what to do here," said Powell. “We’re not really facing it yet because we don’t know what the economic effects will be.”