NEW YORK — U.S. applications for unemployment benefits fell last week to a near 60-year low, signaling a labor market tight enough to remove any urgency for the Federal Reserve to ease monetary policy. The two-year Treasury yield rose 8 basis points to 4.98 percent within minutes of the release.
Fed funds futures now price only a 5 percent chance of a rate cut by the September meeting, down from 18 percent a week ago. The move reflects growing conviction that Federal Reserve Chair Kevin Warsh will hold rates until inflation shows clear movement toward the 2 percent target. Warsh has consistently said the Fed needs "clear and convincing" evidence of that progress before cutting.
The persistence of strong employment data raises duration risk for bond portfolios. The 10-year Treasury yield climbed 5 basis points to 4.66 percent, pushing the 2-year/10-year curve inversion to 32 basis points — a recalibration of market expectations for the terminal fed funds rate.
Equity markets showed a selective read-through. Apple gained 3.5 percent to $333.02 and Alphabet rose 0.6 percent to $319.74, while Microsoft held at $381.70 — moves concentrated in companies with AI integration strategies and strong balance sheets. Market breadth told a different story: the Russell 2000 fell 0.3 percent to 2,930, Tesla dropped 2.1 percent to $313.03 and Meta declined 1.8 percent to $595.19.
