US stocks edge lower as Treasury yields hold near multi-decade highs

Key facts

• US stocks closed slightly lower on Tuesday.
• The 30-year Treasury yield reached 5.6206%, its highest since June 2002.
• The 10-year Treasury yield reached 5.293%, its highest since June 2007.
• Federal Reserve Bank of New York President John Williams indicated the central bank has time to weigh data before deciding on further interest rate hikes.
• Expectations for a 25 basis point Fed rate hike in October declined to 51.5% from nearly 70%.

US stocks closed slightly lower on Tuesday as Treasury yields continued to climb, with investors closely monitoring upcoming inflation and labor market data. The yield on the 30-year Treasury bond reached 5.6206%, its highest level since June 2002, while the benchmark 10-year Treasury yield hit 5.293%, its highest since June 2007.

Comments from Federal Reserve Bank of New York President John Williams suggested the central bank has time to assess economic data before making decisions on further interest rate hikes. This led to a decrease in expectations for an immediate rate increase, with CME FedWatch showing a 51.5% probability of a 25 basis point hike at the October meeting, down from nearly 70% earlier in the session.

However, other Fed policymakers maintained a more hawkish stance. Federal Reserve Governor Michael Barr indicated that more rate hikes might be necessary, and Federal Reserve Bank of Chicago President Austan Goolsbee warned that allowing inflation to remain above the Fed's target for an extended period would be risky.

Rising oil prices, fueled by diminishing hopes for a US-Iran peace deal, have contributed to inflation concerns and pushed Treasury yields higher. Key economic releases this week, including the Personal Consumption Expenditures Price Index and Friday's government payrolls report, are expected to provide further guidance on the Federal Reserve's policy path.

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