Investors are still evaluating last Friday's strong US employment report. Traders have now revised expectations for the Fed to raise interest rates by 25 basis points before December.

Investors are still evaluating last Friday's strong US employment report, which exceeded all expectations and reinforced the market's view that Federal Reserve Chairman Kevin Walsh will need to raise interest rates to curb inflation during his tenure. Meanwhile, Israel's new round of strikes on Iran has also pushed up oil prices and may exacerbate inflation pressures on the world's largest economy. Traders have recalibrated their expectations for the Fed to raise rates by 25 basis points before December, with a likelihood of a second rate hike of about 16%. Last Thursday, the market was betting that the Fed would not raise rates by 25 basis points until March 2027 at the earliest. Since hitting lows in March of this year, the yields on 2-year and 5-year US Treasury bonds have risen by over 80 basis points to currently reach 4.19% and 4.31%, respectively. The benchmark 10-year Treasury yield has risen by over 60 basis points to 4.56%. Economists at Goldman Sachs say that due to a stronger-than-expected labor market, they no longer expect the Fed to cut interest rates this year. JPMorgan predicts that the 10-year Treasury yield will rise to 4.70% by the end of the year. Traders are also betting that this week's CPI data will show the largest increase in recent years, further adding to the argument for a rate hike. During an interview with NBC's Meet the Press, Trump tried to suppress market expectations of a rate hike by stating that there is "no reason" for the Fed to raise rates, that raising the benchmark rate is a "mistake," and that "we should actually lower rates."