The Federal Reserve raised interest rates by a quarter point to a range of 3.75% to 4% on Wednesday, marking the first increase since 2023. The vote was unanimous, with 16 of 18 policymakers penciling in at least one additional rate hike for the remainder of the year. Inflation is reported at 3.4%, unchanged from July but above the Fed's 2% target. The central bank now forecasts a return to its inflation objective no earlier than 2029.
Following the announcement, the 10-year Treasury yield touched 5.04%, its highest level since 2007. The iShares 7-10 Year Treasury Bond ETF (NASDAQ: IEF) closed the third straight week of losses, reaching November 2023 lows. The decline extended across the yield curve, with the 2-year yield climbing to 4.75% and the 30-year yield reaching 5.34%.
The move in bond prices was driven by rising fuel costs, which set records after a drone strike damaged pumping stations on Saudi Arabia’s East-West pipeline. The increased expenses are impacting corporate earnings, most notably in the trucking sector. J.B. Hunt Transport Services Inc. warned that third-quarter profit would fall 5% to 10%, citing $25 million in added driver expenses and over $10 million from fuel. The stock dropped 13.2% for the week, leading losses in the S&P 500. Other transportation companies, including Schneider National Inc., Old Dominion Freight Line Inc., and Knight-Swift Transportation Holdings Inc., also fell during the period.
