Wall Street Today | 10-Year Treasury Yield Hits 5% for First Time Since July 2007

Federal Reserve Chair Jerome Powell suggested the US central bank is inclined to hold interest rates steady again at its next meeting while leaving open the possibility of a future hike if policymakers see further signs of resilient economic growth.

The comments effectively affirm market expectations for the Fed to skip a rate increase for a second straight meeting when officials gather on Oct. 31 and Nov. 1. The Fed chief also said a recent run-up in long-term Treasury yields, if they persist, could lessen the need for further hikes “at the margin,” echoing his colleagues and underscoring the importance of tightening financial conditions to the rate outlook over the coming months.

“Given the uncertainties and risks, and how far we have come, the committee is proceeding carefully,” Powell said Thursday at the Economic Club of New York. “We will decide the extent of additional policy firming and how long policy will remain restrictive based on the totality of the incoming data, the evolving outlook, and the balance of risks.”

After multiple twists and turns, the S&P 500 retreated. Tesla Inc. tumbled 10% on disappointing earnings. 10-year Treasury hits 5% for first time since July 2007, which is more sensitive to imminent Fed moves, fell. Swaps are now pricing the first Fed cut in July — brought forward from September. Traders see less than a 50% chance that the central bank will lift rates one more time in the current tightening cycle

Oil rose in another volatile session as a deal expected to bring more Venezuelan crude to the market in the months ahead did little to assuage immediate concerns that the conflict in the Middle East will reduce supplies.

Analysts estimate that the US’s suspension of some restrictions on Venezuela, in return for plans for freer elections, may enable the South American nation to pump 25% more, an extra 200,000 barrels daily. Venezuelan crude is only a “band-aid solution” for the tightening oil market, said Ed Moya, senior markets analyst at Oanda.

“The risks of a wider war in the Middle East will likely lead to extensive efforts by the West to cover any shortfalls or disruptions of crude outflows,” Moya said. “Venezuela won’t be able to ramp up output to meaningful levels, so whatever oil-price relief we see should be temporary.”