Stocks Edge Higher as Markets Digest Fed Cues, Bond Yields Rise

U.S. stocks were modestly higher by midday Monday as investors weighed cautious Federal Reserve signals and awaited a slate of economic data this week, including second-quarter GDP. A slight dip in short-term yields and continued strength in long-term Treasurys shaped the market tone ahead of Wednesday’s FOMC decision.

Index Snapshot

As of 10:22 a.m. ET, the Dow Jones Industrial Average was up 9.76 points, or 0.02%, to 44,911.70. The S&P 500 advanced 6.45 points, or 0.10%, to 6,395.09, while the Nasdaq Composite led gains, climbing 56.16 points, or 0.27%, to 21,164.5. The Russell 2000 lagged, down 0.17% to 224.00.

Market breadth leaned negative, with decliners outnumbering advancers on the NYSE. Approximately 52% of stocks were in the red, while 41.7% advanced. Despite the uneven tape, more than 74% of stocks remained above their 50-day moving average, signaling underlying technical strength.

Treasury Market and Fed Outlook

Bond yields continued to shift in response to softening economic data and evolving Fed expectations. The 10-year Treasury yield rose to 4.408%, up 2.2 basis points on the day, while the 2-year yield futures for July 2025 fell to 3.821%, reflecting a 7.5 basis point decline.

Goldman Sachs economists reiterated their forecast for three 25 basis point cuts in 2025—in September, October, and December—followed by two more in 2026, with a terminal rate of 3.0%–3.25%. "The activity data have begun to show clearer signs of the below-potential growth that we and most forecasters have expected," the firm wrote in its July FOMC Preview.

With Q2 GDP set for release Wednesday, the Fed is expected to acknowledge a “moderate” rather than “solid” pace of growth. Goldman anticipates the Fed will hold rates steady this week and maintain a meeting-by-meeting posture through the fall.

Economic Concerns Mount

Underlying macroeconomic softness is weighing on sentiment. Real GDP growth in the first half of 2025 is tracking at just 1.1%, per Goldman estimates, and the deceleration has emerged before the full drag from tariff impacts is felt. "Consumer spending growth slowed more sharply than expected... even though the great bulk of the tax-like hit to real income from tariff-driven price increases is still ahead," the report noted.

While inflation appears on track to converge toward the Fed’s 2% target, a temporary boost from tariffs could push core PCE inflation above 3% in the short term. Governor Waller has downplayed this as a one-time effect unlikely to destabilize expectations—a view Goldman shares. However, some FOMC members may hesitate to ease policy amid such a near-term spike.

Demographic Dynamics

A broader structural factor shaping markets is the growing concentration of household wealth among older Americans. According to Federal Reserve and Apollo Chief Economist data, individuals aged 55 and older now own 70% of all U.S. household assets, up from 50% in 2001. This shift could dampen economic dynamism and has implications for both consumption and investment behavior moving forward.