U.S. equity markets bounced off seven-month lows on Monday, with major indices broadly higher by midday as President Donald Trump disclosed active negotiations with a “new and more reasonable” Iranian regime while Fed Chair Jerome Powell downplayed the need for imminent rate hikes.
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Powell reinforced the cautiously optimistic mood at Harvard University on Monday, where he said President Trump’s tariffs represented a “one-time price bump” and that the central bank has limited ability to offset supply shocks like war-driven energy surges.
“Inflation expectations appear to be well-anchored,” Powell said.
Markets interpreted Powell’s remarks as modestly dovish: the implied probability of a Fed rate hike in 2026 dropped to around 18%, as per the CME FedWatch tool.
The yield on the 10-year U.S. Treasury note fell around 10 basis points to 4.34%, pulling back from the eight-month highs struck on Friday. The 2-year note also fell about 10 basis points to 3.82%, while the 30-year bond yielded 4.90%, down seven basis points.
Across U.S. equity markets by midday Monday, gains were broad-based, with nine of 11 S&P 500 sectors advancing.
The S&P 500 advanced 0.7% to 6,413, while the Dow Jones Industrial Average gained 1.1% to 45,650. The Nasdaq 100 gained 0.5% to 23,240.
