Weak Data Boosts Fed-Cut Bets as Bond Yields Fall

Bond yields dropped Tuesday as disappointing economic data fueled speculation that the Federal Reserve may soon need to lower interest rates to avoid a potential recession. At the same time, U.S. stocks wavered, with major companies becoming increasingly cautious about offering guidance for 2025 due to growing tariff-related uncertainties.

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U.S. Treasury prices climbed across the board, causing yields to fall, after fresh data showed that consumer confidence in April declined to its lowest level in nearly five years. Adding to investor concerns, the number of job openings also fell, signaling a potential slowdown in the labor market. These developments raised worries about the strength of the U.S. economy and increased bets that the Fed could shift toward monetary easing in the coming months.

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The S&P 500 index fluctuated throughout the session, swinging between modest gains and losses. The volatility came amid a wave of corporate earnings reports, with some prominent companies declining to offer projections for the next year. General Motors and JetBlue Airways were among those opting not to provide 2025 forecasts, citing uncertainties tied to tariffs.

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Meanwhile, Amazon shares dipped after the White House criticized the company for flagging tariff impacts on prices, calling the move a “hostile” and politically motivated gesture.

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Economic cracks appear to be widening after a relatively strong showing in 2024. The U.S. economy, which had been growing steadily through most of last year, has started to slow in early 2025. A combination of consumer fatigue and a growing trade imbalance — intensified by a surge in pre-tariff import activity — has weighed on overall momentum. This environment has investors and economists increasingly cautious about the outlook for the rest of the year.

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“The recent data suggests more weakness could be on the horizon,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets. “As concerns about economic growth intensify, we’re leaning toward the view that yields will continue to trend lower.”

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Wall Street strategists are adjusting their expectations in response to these developments. HSBC Holdings, for instance, has revised its year-end target for the S&P 500 index downward, cutting it to 5,600 from a previous forecast of 6,700. The firm cited slowing economic growth and the disruptive impact of new tariffs as key risks that could limit earnings potential for U.S. companies.

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In a note to clients, HSBC’s team of analysts, including Nicole Inui, stated, “We think the market narrative will continue to swing back and forth between fears of recession and concerns about stagflation. This tug-of-war is likely to persist until the situation with tariffs stabilizes, the Fed begins lowering rates, or inflationary pressures prove to be less significant than expected.”

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Overall, the day’s market movements reflected the growing sense of uncertainty facing both investors and corporate executives. The bond market’s rally and the cautious tone in equity markets underscored a broader lack of confidence in the near-term economic trajectory. With key indicators such as consumer sentiment and labor demand weakening, the spotlight has turned back to the Fed and its potential policy moves in the second half of the year.

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Fed officials have thus far maintained a cautious stance, waiting for more evidence before making any decisions about rate cuts. However, if economic data continues to deteriorate, pressure is likely to mount for the central bank to take action. For now, investors are keeping a close watch on upcoming economic releases and earnings reports for further clues on the path ahead.

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In the meantime, many companies are opting for a wait-and-see approach. Rather than issue full-year forecasts that could quickly become obsolete, executives are holding back until there is more clarity around global trade dynamics and domestic economic trends.

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This uncertainty, coupled with signs of slowing demand, has created a tense environment in financial markets. While some investors see a possible buying opportunity if the Fed begins easing policy, others are wary of downside risks tied to both recession and inflation. The result is a market that remains highly sensitive to every new data point — and prone to sharp swings as traders try to anticipate the next move by policymakers and corporations alike.

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