S&P 500 Closes Worst Month Since March 2025 (-5%); 10Y Treasury Yield Falls to ~4.22% on Month-End Flows and Rate-Cut Optimism

The final session of March 2026 crystallized a difficult month for risk assets. The S&P 500 closed down approximately 5% for the month — its worst monthly performance since March 2025 — with year-to-date returns flat to slightly negative. The Nasdaq lost roughly 7% in March. 'Magnificent Seven' mega-cap tech stocks shed over $500 billion in combined market capitalization during the month. On March 31 specifically, the 10-year Treasury yield fell from approximately 4.35% (March 30) to approximately 4.22% — the sharpest single-day rate decline in weeks — driven by month-end portfolio rebalancing flows (institutional rebalancing favors bonds when equities underperform), recalibrated rate-cut odds as growth concerns resurfaced, and some relief that inflation had not broken above the 3% level. The Federal Reserve's March 2026 SEP (released March 18) had revised core inflation for 2026 upward to 2.7% and projected unemployment at 4.4% in Q4 2026 — while probability of a 2026 rate hike dropped to approximately 20% (down from 35% earlier in the month) as growth risk reasserted. The partial yield decline reinforced the stagflation narrative: higher inflation expectations but also rising recession probability.