Stocks on Wall Street edged higher in midday trading on Tuesday amid growing hopes the Federal Reserve is done with interest rate hikes for now but with investors still cautious as the Middle East conflict escalated.
The Dow Jones Industrial Average (^DJI) was up around 0.8%, while the S&P 500 (^GSPC) gained more than 1.0%. The tech-heavy Nasdaq Composite (^IXIC) also added roughly 1.2%, after the stock indexes reversed losses to close higher on Monday.
But as stocks climbed higher, treasury yields continued to fall with the yield on the 10-year (^TNX ) falling 16 basis points to trade near 4.63% amid a wider sell-off in bonds.
The gains came after dovish comments from two Fed officials, who signaled that the recent surge in bond yields could lead to the tightening in credit conditions the central bank is looking for. That could give policymakers a reason to call an end to raising rates in this cycle, some analysts believe.
Read more: What the Fed rate-hike pause means for bank accounts, CDs, loans, and credit cards
But the IMF has warned that monetary policy needs to remain tight in most places, as central banks are “not quite there” on bringing tenacious inflation down toward targets.
Easing some pressure on stocks, yields on Treasurys dropped as trading reopened on Tuesday after closing for a holiday. The 10-year Treasury (^TNX) yield came off its 16-year peak even as investors kept watch on the clashes between Islamist militant group Hamas and Israel, which has vowed to put the Gaza strip under siege.
In another sign of easing worries, oil prices fell after gaining more than 4% as investors eyed potential supply disruptions from the Middle East conflict. Crude oil futures (CL=F) and Brent crude futures (BZ=F) both lost almost 1% to trade below $86 and above $87 respectively.
In individual stocks, PepsiCo (PEP) shares rose 1.1% after the maker of Pepsi soda and Frito Lay snacks hammered Wall Street estimates for third quarter profit and raised its annual earnings forecast.
Eyes will be on the several Fed officials speaking on Tuesday, including Raphael Bostic, Neel Kashkari, Christopher Waller, and Mary Daly.
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AStocks add to gains amid sell-off in yields
US stocks added to gains seen earlier in the session with the tech-heavy Nasdaq Composite (^IXIC) jumping 1.2% while the benchmark S&P 500 (^GSPC) climbed 1.1% followed by the Dow Jones Industrial Average (^DJI) with a gain of 0.8%
Treasury yields continued to fall with the note on the 10-year falling 16 basis points to trade near 4.63%
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Hollywood writers overwhelmingly ratified a new three-year agreement with studios, officially ending a strike that lasted nearly 150 days before a deal was reached in late September.
99% of Writers Guild of America (WGA) members voted to ratify the contract with 8,435 “yes” votes and just 90 “no” votes, or 1% of total members, the union said late Monday. The terms of the new agreement will run from September 25, 2023 through May 1, 2026.
“Through solidarity and determination, we have ratified a contract with meaningful gains and protections for writers in every sector of our combined membership,” WGA West President Meredith Stiehm said in a statement. “Together we were able to accomplish what many said was impossible only six months ago.”
The guild was successful in achieving many of its demands, which included increased regulations surrounding the use of artificial intelligence, minimum staffing requirements, viewership-based streaming bonuses, more data transparency, higher health and pension contribution rates, a boost to streaming residuals, and more.
The guild was also able to achieve a 5% wage increase this year, which will be followed by a 4% jump in 2024 and a 3.5% boost in 2025.
SAG-AFTRA — the union that represents approximately 160,000 actors, announcers, recording artists, and other media professionals around the world — still remains firmly on the picket lines, although the guild is currently in negotiations with studios.
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JRising yields aren’t ‘out of the woods’ yet
Treasury yields fell on Tuesday, easing off 16-year highs that had spooked markets over the past week.
But SoFi head of investment strategy Liz Young told Yahoo Finance Live that the market’s latest “pain trade” might not be over.
“I don’t think bonds are completely out of the woods yet,” Young said. “We also haven’t seen very much weak economic data. … At this point, there hasn’t been a good reason for yields to come down and stay down.”
Young highlights that yields are moving down ahead of the latest read on inflation expected on Thursday. Last month’s Consumer Price Index report showed prices grew 3.7% in August compared to last year, with an increase driven largely by rising energy prices. While economists surveyed by Bloomberg see inflation falling to a 3.6% increase in September, Young is “not super optimistic” based on energy prices moving higher for much of September.
Broadly, higher inflation could cause the Fed to hike interest rates once more. A rising fed funds rate has been a key driver of yields during this hiking cycle.
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Global economy ‘limping along’ as IMF cuts 2024 GDP forecast
The International Monetary Fund (IMF) released its latest World Economic Outlook on Tuesday as IMF chief economist Pierre-Olivier Gourinchas said the global economy still faces uncertainties, especially on the heels of the latest conflict in Israel.
“The global economy is limping along, not sprinting,” Gourinchas said at a news conference in Morocco. He added the IMF was “monitoring the situation [in Israel] closely” but that it was “too early” to assess the global economic impact, although the conflict will likely continue to boost oil prices in the near-term.
“We’ve seen that in previous crises and previous conflicts. And of course, this reflects the potential risk that there could be disruption either in production or transport of oil in the region,” he said.
The IMF left its global GDP growth forecast unchanged at 3.0% for this year, citing the “remarkable strength” of the US economy despite recent sluggish data out of China and the euro zone. The organization raised its US growth projections by 0.3 percentage points compared to its previous July update to 2.1% for this year.
Still, the IMF cut its 2024 global GDP forecast to 2.9%, down from its July target of 3.0% and warned that overall global growth will remain low.
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Stocks edge slightly higher, yields fall
US stocks opened modestly higher on Tuesday with the the Dow Jones Industrial Average (^DJI) rising 0.3% while the S&P 500 (^GSPC) and tech-heavy Nasdaq Composite (^IXIC) rose about 0.2% and 0.1%, respectively. Treasury yields, meanwhile, dropped by the most since March with the note on the 10-year falling 11 basis points to trade near 4.68%
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PepsiCo, Arm, Rivian: Stocks trending in premarket trading
Here are some of the stocks leading Yahoo Finance’s trending tickers page in premarket trading on Tuesday:
PepsiCo (PEP): Shares rose 1% premarket. The company beat Wall Street estimates in its third quarter earnings release on Tuesday.
Arm (ARM): The chipmaker’s shares rose by almost 2% premarket on Tuesday. Analysts from Guggenheim, Citi, and JPMorgan initiated coverage on semiconductor company, each giving the stock a bullish rating.
Rivian (RIVN): Rivian shares were up over 2% after a UBS upgrade. However, Wedbush cut its price target for the EV maker to $25 from $32.
Unity Software (U): Shares rose 4%. The group named technology veteran James Whitehurst as interim CEO on Tuesday, replacing John Riccitiello, who is retiring.
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KStock futures inch up as hopes for Fed pause rise
The major stock indexes were poised to open in the green on Tuesday as investors focused on dovish comments from Federal Reserve officials but kept one eye on developments in the Middle East conflict.
Futures on the Dow Jones Industrial Average (^DJI) added 0.17%, or 58 points, while S&P 500 (^GSPC) futures rose 0.11%. Contracts on the tech-heavy Nasdaq 100 were up 0.12%.
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