US Stock Indices and Treasury Yields Rise Amid Strong Services Growth and Shifting Rate Cut Expectations

Washington | EcoPulse24

Economic and financial indicators in the United States showed mixed performance on Wednesday as investors continued to assess the impact of Middle East conflict, rising energy prices, and trade tensions on the US economy and Federal Reserve policy.

US Stocks
US stock indices rose as markets reassessed inflation risks tied to energy and tariffs. The S&P 500 climbed about 0.8%, while the Nasdaq 100 gained roughly 1.5%, supported by strong advances in tech stocks. Amazon, Micron, and AMD each rose around 3% after previous declines, while investment firms KKR and Bridgewater also rebounded by about 3%.

The recent pause in fuel price increases eased some inflation fears. The US Treasury Secretary announced government plans to curb energy price hikes, even as global tariffs are set to rise to 15% this week before returning to prior levels in about five months.

Treasury Yields
The yield on 10-year US Treasuries increased to 4.09%, marking a third consecutive gain amid ongoing inflation pressures linked to energy. However, reports of potential negotiations to resolve the Iran conflict and easing oil and gas prices limited further yield increases. Markets have scaled back expectations for rate cuts, with the first cut now priced in for September instead of July, and two 25-basis-point cuts expected by year-end.

Oil Inventories
US Energy Information Administration data showed crude oil inventories rose by 3.475 million barrels to 439.3 million barrels for the week ending February 27, exceeding market forecasts of a 2.3 million barrel build. Cushing, Oklahoma inventories rose by 1.564 million barrels. Gasoline stocks fell by 1.704 million barrels to 253.1 million barrels, a larger drop than the expected 0.8 million barrel decline. Distillate stocks, including diesel and heating oil, rose by 429,000 barrels to 120.8 million barrels, defying expectations for a 2.6 million barrel decrease.

Services Sector
ISM data indicated significant acceleration in US services activity, with the services PMI rising to 56.1 in February from 53.8 in January, beating expectations and marking the fastest growth since August 2022. Business activity and new orders also hit multi-month highs. The employment index improved, while the prices index dropped to its lowest since March 2025 but remained above 60, indicating ongoing inflationary pressure. In contrast, S&P Global’s services PMI fell to 51.7, the slowest growth in ten months, reflecting weaker external demand and trade tensions.

The composite PMI for the US economy dropped to 51.9 from 53, a ten-month low, as growth slowed across services and manufacturing.

Labor Market
ADP data showed US private employers added 63,000 jobs in February, the highest since July and above expectations of 50,000. Education and healthcare led the gains, followed by construction and information. Professional and business services lost 30,000 jobs, while manufacturing shed 5,000. Small businesses added 60,000 jobs, large firms 10,000, while medium-sized firms lost 7,000. Annual wage growth for job stayers held at 4.5%, and slowed to 6.3% for job changers-the narrowest historical gap.

Real Estate
The 30-year fixed mortgage rate stabilized at 6.09%, the lowest since 2022, according to the Mortgage Bankers Association. Lower yields boosted mortgage demand, with applications up 11% in the last week of February. Refinancing applications surged 14.3%, and new home purchase applications rose 6.1%.

EcoPulse24 Analysis
Current US data paints a complex economic picture, combining robust activity and persistent inflation pressures. While services and labor markets show resilience, rising energy prices and geopolitical risks heighten uncertainty about inflation’s path. This mix is pushing markets to reassess rate cut expectations, making the coming months crucial for US monetary policy and global markets.