One area drawing increasing attention is the bond market. Treasury yields have continued moving higher in recent weeks, with the 10-year Treasury yield moving toward levels not seen since early 2025 and the 30-year Treasury yield touching levels not seen in many years.
Higher yields are not automatically negative for stocks. Investors generally tolerate rising yields when economic growth remains healthy because stronger growth can support earnings and business activity. But rapid moves higher can create a different reaction because they increase borrowing costs and eventually pressure stock valuations.
That issue has not disappeared.
Investors have largely looked through rising yields while earnings remained strong, but if rates continue climbing the market could become more sensitive to the move.
PCE Inflation Report Could Become the Week’s Biggest Test
The biggest scheduled event of the week will likely arrive Thursday with the release of the Personal Consumption Expenditures price index, commonly known as the PCE report.
This remains the Federal Reserve’s preferred measure of inflation and traders understand its importance. Recent inflation data has stayed more stubborn than many investors expected and markets will be looking for signs that price pressures are either easing or becoming more deeply rooted throughout the economy.
A softer reading would likely support Monday’s positive tone and reinforce expectations that inflation pressure may continue moderating. A hotter reading could create a very different reaction and quickly shift attention back toward interest rates.
Market expectations have already started changing. Earlier in the year investors focused heavily on the timing of potential rate cuts. More recently some traders have started asking whether rates may remain elevated longer than previously expected.
There are also several company reports later this week that could attract attention. Retailers including Costco, Best Buy and Dollar Tree may provide another look at consumer spending behavior while AI-related names remain in focus after Nvidia recently reinforced the artificial intelligence spending story with another strong outlook.
Short-Term Forecast
Monday’s futures action gives investors a positive start to the shortened week, but several important events still sit directly ahead. Lower oil prices helped ease immediate inflation concerns and encouraged investors to step back into risk assets, but Treasury yields, inflation data and changing Federal Reserve expectations remain major factors.
For now buyers appear to have the advantage because lower oil prices helped remove one source of market pressure. But the week is just beginning, and traders have several opportunities ahead to rethink the story. By Thursday the conversation on Wall Street could look very different.
More Information in our Economic Calendar.