US stocks avoid sharp losses despite rise in T-yields and rate hike odds

US stocks remain in the negative territory, but so far have avoided sharp losses despite the rise in the short-duration treasury yields and June rate hikes bets.

At the time of writing, the Dow was down 15 points at 20,935 levels. The S&P 500 was down 5 points at 2385 levels, while the tech-heavy NASDAQ was down 33 points at 6060 levels.

Fed kept rates unchanged and looked through first quarter weakness as expected. The policy statement said the inflation is now running close to the Fed’s 2 % goal. Sunnier outlook coupled with upbeat comments on inflation seems to have pushed the June rate hike odds, as represented by CME data, to 90%.

The 2-year treasury yield, which mimics short-term rate hike bets, also extended gains to 1.302%; up four basis points on the day.

Stocks are in ‘stuck in a rut ’ kind of situation and are likely to remain flat lined until we get more information out of Trump administration on tax cuts and deregulation.

Moreover, Fed’s dismissal of the softer data suggests the central bank is expecting a rebound in the second quarter and that is positive for the stocks.