Powell’s Dovish Tone Lifts Treasury Market

Market Overview

Federal Reserve Chair Jerome Powell signaled a more dovish stance, providing support to the recently battered bond market. However, escalating tensions in the Middle East, combined with prior pressure from Googles new storage technology developments, led U.S. equities to reverse early gains. The Nasdaq dropped approximately 1.2% intraday and ultimately closed down 0.73%.

The Philadelphia Semiconductor Index briefly plunged nearly 5%, with memory-related stocks under heavy pressure. Micron Technology tumbled nearly 10%, while Western Digital fell 8.6%. Coherent Corp. declined 9.8%. In contrast, the financial sector gained 1.1%, supported by asset management firms, with Blackstone up 3.3% and KKR rising 2.1%. Meanwhile, Bill Ackman highlighted a “10x opportunity,” driving Fannie Mae and Freddie Mac shares up roughly 50%.

Following Powells dovish remarks, markets renewed bets on potential rate cuts within the year. The yield on the 10-year U.S. Treasury declined nearly 8 basis points, while the 2-year yield fell 8.6 basis points.

Key Highlights• Powell: Fed Policy Rate “Well Positioned”

Powell stated that it is too early to fully assess the economic impact of the Iran conflict. He emphasized that energy price shocks are typically transitory, and monetary policy operates with significant lags, making it ineffective in offsetting supply-side inflation pressures in real time. As such, the Fed generally looks through such shocks, provided that inflation expectations remain well anchored.

He reiterated that long-term inflation expectations remain stable and that tariffs tend to have a one-off effect on inflation. The Fed remains committed to bringing inflation back to its 2% target.

Powell also defended quantitative easing (QE), noting that extensive research supports the effectiveness of large-scale asset purchases in lowering long-term interest rates. He added that the Fed is closely monitoring private credit markets but currently sees no systemic risks.

On structural trends, Powell highlighted that large language models (LLMs) are likely to replace a significant portion of automatable jobs. While the current labor market presents challenges for younger workers, he remains optimistic about long-term prospects.

He also advised future policymakers, including potential successor Kevin Warsh, to avoid using monetary policy tools for non-monetary objectives.

According to the so-called “Fed whisperer,” Powell suggested the Fed can look through oil price shocks but warned that patience is not unlimited.

• White House: Trump Seeks Agreement by April 6

The White House reiterated that the Pentagon expects any potential conflict with Iran to last approximately four to six weeks. Officials indicated that Iran has privately agreed to certain elements of the U.S. proposal.

The U.S. Secretary of State stated that military objectives could be achieved within weeks rather than months, while noting that Trump still prefers a diplomatic resolution. Negotiations remain in early stages, including indirect communication through intermediaries. Post-conflict, the U.S. may reassess its relationship with NATO.

Iran, however, denied any direct negotiations with the U.S., stating that communications have only occurred through intermediaries. Tehran described the proposed ceasefire terms as excessive and unreasonable, reaffirmed its commitment to defensive operations, and reported strikes on multiple Israeli military-industrial facilities.

Iran also accused the U.S. and Israel of attacking its steel infrastructure, labeling the actions as state terrorism, and criticized Washington for “presenting wishful thinking as news.” Additionally, Iran accused Ukraine of involvement in military operations against it.

Key Data to Watch (GMT+8)

• 21:45 ET – U.S. March Chicago PMI

• 22:00 ET – U.S. March Conference Board Consumer Confidence Index