Treasuries regain ground as Waller stokes Fed hopes

A post-holiday Wall Street session saw Treasuries trimming losses after Federal Reserve Governor Christopher Waller said rates could drop as soon as July. Stocks wavered as traders braced for a $6.5 trillion expiration of options, while keeping an eye on the latest developments in the Middle East.

The S&P 500 swung between gains and losses, with a quarterly episode known as “triple witching” in which derivatives contracts tied to stocks, index options and futures amplifying the potential for instability. Shorter-dated bonds outperformed, with two-year yields trading around 3.94%. Oil fell on a news report that Tehran is ready to discuss limitations on its uranium enrichment.

Concerns about an imminent US military involvement in the Middle East conflict eased as President Donald Trump held off on a decision on whether to strike Iran. 

Meantime, Waller reiterated his view that the inflation hit from tariffs is likely to be short-lived. His comments on CNBC followed this week’s Fed decision to keep rates on hold for the fourth straight policy meeting. Officials signaled on Wednesday their expectation for two rate cuts before the end of 2025.

“The market is dealing with a lot presently, from geopolitical tensions, tariff uncertainty and questions about the Federal Reserve’s next move,” said Brian Buetel at UBS Wealth Management. “While there are different risks on the horizon, stocks are a forward looking barometer of economic growth, which we believe will hold up this year.”

Corporate Highlights:

• Tesla Inc. is set to open its first showrooms in India in July, people familiar with the discussions said, kicking off formal operations in the world’s third-biggest automobile market as the Elon Musk-led firm hunts for growth amid falling sales in Europe and China.
• Musk’s artificial intelligence startup xAI Corp. offered investors sweeter pricing on its $5 billion debt offering Friday, as Morgan Stanley wraps up commitments for the deal.
• Meta Platforms Inc. is going up-market with its surprise hit smart glasses, rolling out new models with Oakley that are aimed at athletes and include improved video recording.
• Kroger Co.’s sales surpassed expectations during the latest quarter, a sign that consumers are still spending on groceries and other essentials even amid economic turbulence.
• Darden Restaurants Inc. is considering “strategic alternatives” for its Bahama Breeze chain, Chief Executive Officer Rick Cardenas said.
• Home Depot Inc. has made an offer for GMS Inc., potentially setting off a bidding war with QXO Inc. which this week made a $5 billion offer for the building-products distributor, the Wall Street Journal reported Thursday.
• CarMax Inc. reported comparable sales and earnings per share that beat consensus estimates.
• Accenture Plc reported its third-quarter results, and highlighted bookings as a weak spot of the print.
• SoftBank Group Corp. founder Masayoshi Son is seeking to team up with Taiwan Semiconductor Manufacturing Co. to realize what could be his biggest bet yet — a trillion-dollar industrial complex in Arizona to build robots and artificial intelligence.
• Temu’s sales decline in the US is deepening as the online marketplace drastically cuts spending on advertising targeting American consumers, signaling a shift in focus after President Donald Trump’s tariff barrage.

Some of the main moves in markets:

Stocks

• The S&P 500 was little changed as of 10:31 a.m. New York time
• The Nasdaq 100 was little changed
• The Dow Jones Industrial Average rose 0.3%
• The Stoxx Europe 600 rose 0.3%
• The MSCI World Index was little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.1505
• The British pound was little changed at $1.3470
• The Japanese yen fell 0.3% to 145.86 per dollar

Cryptocurrencies

• Bitcoin rose 0.9% to $105,242.95
• Ether rose 0.4% to $2,517.66

Bonds

• The yield on 10-year Treasuries advanced three basis points to 4.42%
• Germany’s 10-year yield was little changed at 2.52%
• Britain’s 10-year yield was little changed at 4.54%

Commodities

• West Texas Intermediate crude fell 0.2% to $74.98 a barrel
• Spot gold was little changed