Treasury yields surged after data showing U.S. economic strength bolstered speculation the Federal Reserve will have room to raise interest rates twice more this year.

Bonds fell across the curve, with two-year yields jumping 16 basis points to 4.87 per cent. Swap markets indicate a 50 per cent chance of a second Fed hike by year-end. The dollar erased losses. The S&P 500 fluctuated, with the stock market set for more instability as traders adjust their positions at the end of the quarter.

U.S. jobless claims fell by the most since October 2021 in a week that included the Juneteenth holiday. Gross domestic product was revised up notably to a 2 per cent annualized advance in the first quarter, separate data showed. Meanwhile, key gauges of inflation watched closely by the Fed were revised down slightly.

“The market is processing the recent strength in the economic data in both positive and negative ways, as solid economic data means that the economy is more resilient, but it also emboldens the Federal Reserve to keep raising interest rates,” said Carol Schleif, chief investment officer at BMO Family Office.

Fed Bank of Atlanta President Raphael Bostic said he favors keeping borrowing costs on hold, but that Chair Jerome Powell and other colleagues don’t agree with him. Powell is signaling keenness to lift rates, having told a conference in Madrid just hours earlier that acting at consecutive policy meetings isn’t “off the table.”

In corporate news, Bank of America Corp. and Wells Fargo & Co. paced gains in financial companies as the biggest U.S. lenders passed the Fed’s stress test, clearing the way for payouts. Netflix Inc. climbed as Citigroup Inc. raised its price target.

Key events this week:

• China manufacturing PMI, non-manufacturing PMI, balance of payments, Friday
• U.S. personal income and spending, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 was little changed as of 9:31 a.m. New York time
• The Nasdaq 100 was little changed
• The Dow Jones Industrial Average was little changed
• The Stoxx Europe 600 was little changed
• The MSCI World index fell 0.2 per cent

Currencies

• The Bloomberg Dollar Spot Index rose 0.3 per cent
• The euro fell 0.4 per cent to US$1.0873
• The British pound fell 0.3 per cent to $1.2603
• The Japanese yen fell 0.2 per cent to 144.79 per dollar

Cryptocurrencies

• Bitcoin rose 2 per cent to $30,701.65
• Ether rose 2 per cent to $1,867.35

Bonds

• The yield on 10-year Treasuries advanced 12 basis points to 3.83 per cent
• Germany’s 10-year yield advanced eight basis points to 2.39 per cent
• Britain’s 10-year yield advanced six basis points to 4.38 per cent

Commodities

• West Texas Intermediate crude fell 0.1 per cent to $69.48 a barrel
• Gold futures fell 1.1 per cent to $1,901.40 an ounce