The world’s biggest bond market extended this month’s selloff after solid economic readings and hawkish Fedspeak reinforced speculation that interest rates will remain higher for longer.

Treasuries fell across the U.S. curve — with two-year yields once again near the 5 per cent mark. When asked about the possibility of hiking, Fed Bank of New York President John Williams said that while that is “not” his baseline expectation, it’s possible, if warranted. The S&P 500 dropped for a fifth straight session — its longest losing run since October.

“Most of the data this week show the economy is still firing on all cylinders,” said Chris Larkin at E*Trade from Morgan Stanley. “That’s going to be a challenge for the Fed’s rate-cutting plans.”

Treasury 10-year yields rose five basis points to 4.63 per cent. The S&P 500 fell to almost 5,000, with its most influential group — technology — leading declines. Netflix Inc. posted its best start to the year since 2020, attracting more new customers than anyone expected thanks to a strong slate of original programs and a crackdown on password sharing.

In addition to remarks from Fed’s Williams, his Atlanta counterpart Raphael Bostic said he’s comfortable keeping interest rates steady, reiterating he doesn’t think it will be appropriate to lower borrowing costs until toward the end of the year.

“Fedspeak is making us increasingly nervous,” said Andrew Brenner at NatAlliance Securities. He addded that if the two-year U.S. yield breaks 5 per cent, the next level to watch would be 5.2 per cent.

In economic data, jobless claims remained subdued, consistent with a healthy job market. Separately, the Philadelphia Fed factory index topped estimates. While existing-home sales fell, the pace was roughly in line with the median forecast of economists.

Market-implied expectations for Fed rate cuts — which have collapsed in the past two weeks — declined further this week after Chair Jerome Powell signaled policymakers will wait longer than previously anticipated to ease policy. An initial quarter-point reduction remains priced in for November.

The Fed may not cut interest rates at all this year with inflation remaining high, said JPMorgan Chase & Co. President Daniel Pinto.

“It may take a bit longer until they can cut rates,” Pinto said at a Semafor event in Washington, adding that the likelihood of a rate hike is “very, very low” amid widespread skepticism that inflation will ease any time soon. The Fed isn’t in any hurry, as a rate cut that comes too early would be “painful” and probably cause a recession, he said.

The market’s biggest worry right now is inflation, which is re-accelerating and throwing cold water on the idea of any rate cuts in 2024, let alone one or two, according to Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management.

“We are firmly in the camp of no rate cuts in 2024,” he said. “We believe investors should prepare for a higher for longer regime when it comes to both inflation and interest rates and that investment portfolios should be positioned for these dynamics for the foreseeable future.”

“With rate cuts delayed, rather than canceled, in our view, we still expect the yield on the 10-year U.S. Treasury to end the year around 3.85 per cent, said Mark Haefele at UBS Global Wealth Management. “Once the Fed begins cutting rates this year, the bond market will likely continue to price a sequence of further cuts into 2025 and beyond.”

While timing the market is hard, investors can more confidently add duration exposure, according to Bank of America Corp. strategists led by Mark Cabana, who recommend “going long” five-year Treasuries.

The trade is supported by “Fed unlikely to hike, risk asset sensitivity to rates and cleaner duration positioning,” they noted.

Corporate Highlights:

• Alphabet Inc. Chief Executive Officer Sundar Pichai announced changes to Google’s workplace teams structure, saying the moves will help the company develop artificial intelligence products and services faster and more efficiently.
• Micron Technology Inc., the largest U.S. maker of computer-memory chips, is poised to get US$6.1 billion in grants from the Commerce Department to help pay for domestic factory projects, part of an effort to bring semiconductor production back to American soil.
• D.R. Horton Inc. increased sales expectations for its full fiscal year as the U.S. housing market heads into its key spring selling season.
• Alaska Air Group Inc. expects second-quarter profits will top analyst estimates, signaling that the carrier is recovering from a near-catastrophe on one of its planes that triggered the temporary grounding of a key Boeing Co. aircraft model.
• Las Vegas Sands Corp. said remodeling at an entertainment center and a hotel in Macau will crimp results this year.
• EBay Inc.’s embrace of artificial intelligence has turned the stock’s most bearish analyst into its biggest fan, with Morgan Stanley seeing a further 25 per cent gain for the shares over the next year.
• DNA testing firm 23andMe Holding Co.’s Chief Executive Officer Anne Wojcicki said she’s considering taking the struggling company private, less than three years after it began selling shares.
• Blackstone Inc. collected more fees from big retail funds and credit strategies during the first quarter, compensating for the slower pace of deal exits.
• L’Oréal SA reported better-than-expected first-quarter sales as strength in Europe and North America helped offset a slowdown in shopping by Chinese travelers.

Key events this week:

• Japan CPI, Friday
• BOE Deputy Governor Dave Ramsden and ECB Governing Council member Joachim Nagel speak, Friday
• Chicago Fed President Austan Goolsbee speaks, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.2 per cent as of 4 p.m. New York time
• The Nasdaq 100 fell 0.6 per cent
• The Dow Jones Industrial Average was little changed
• The MSCI World index was little changed

Currencies

• The Bloomberg Dollar Spot Index rose 0.1 per cent
• The euro fell 0.3 per cent to $1.0644
• The British pound fell 0.1 per cent to $1.2437
• The Japanese yen fell 0.1 per cent to 154.62 per dollar

Cryptocurrencies

• Bitcoin rose 4.4 per cent to $63,518.01
• Ether rose 3.1 per cent to $3,065.7

Bonds

• The yield on 10-year Treasuries advanced five basis points to 4.63 per cent
• Germany’s 10-year yield advanced three basis points to 2.50 per cent
• Britain’s 10-year yield advanced one basis point to 4.27 per cent

Commodities

• West Texas Intermediate crude was little changed
• Spot gold rose 0.8 per cent to $2,380.08 an ounce