Stock and bond markets retreated on the heels of last week's inflation report that suggested a "higher for longer" interest rate outlook.

Stocks and gold retreated after hitting fresh records and treasuries also fell after data released today suggested expanding manufacturing. After digesting economic data in Friday’s PCE report, the Federal Reserve’s preferred inflation metric, investors appear to maintain soft landing hopes tempered by a continuation of high interest rates.

The iShares 20+ Year Treasury ETF (TLT) dropped 2% before noon, bringing the bond market proxy's year-to-date decline to 6%.  The S&P 500 ETF Trust (SPY) , up 10% so far this year reversed earlier gains to drop less than 1% and the SPDR Gold Trust (GLD) was up about 1% amid morning fluctuations.

While the core Personal Consumption Expenditures Price Index came in at 2.8% year-over-year, as expected, and inflation has trended downward since its 9.1% peak in 2022, Friday's report wasn't enough to raise hopes that the U.S. central bank would slash interest rates at its next meeting in May.

"Investors appear to have not found economic data to cheer about from Friday's PCE report, and have grown pessimistic that jobs data coming out this week will provide any relief," etf.com research lead Kent Thune said.

The U.S. Commerce Department report comes just two weeks after the Consumer Price (CPI) and Producer Price (PPI) indexes also showed inflation remaining stubbornly high.

As a new month and a new quarter begins, stocks and gold started the second quarter by recording fresh all-time highs, but then giving back gains within an hour of trade.

TLT Falls While QQQ, GLD Remain Resilient

With no economic data pointing to falling inflation, and rates expected to remain higher for longer in 2024, bond yields rose, which pushed their prices lower. In midmorning trading,

Higher rate expectations did not harm the outlook for growth stocks or gold, as the tech heavy Invesco QQQ Trust (QQQ) and the were among the few ETFs remaining positive in morning trading.

Part of what may be weighing on investors’ minds is “jobs week” data coming, including the latest Job Openings and Labor Turnover Survey (JOLTS) scheduled for Tuesday, which is followed by ADP's private employment report for March on Wednesday.

The economic event of the week will be Friday's U.S. non-farm payrolls data, with economists expecting 216k jobs added to the economy in March, which would mark a deceleration from the 275k job additions in February.