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Stocks on Wall Street edged higher 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) closed up around 0.4%, while the S&P 500 (^GSPC) gained 0.5%. The tech-heavy Nasdaq Composite (^IXIC) also added roughly 0.6%, after the stock indexes reversed losses to close higher on Monday.
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.
The latest was Atlanta Fed President Raphael Bostic, who said Tuesday he believes current rates are high enough to get inflation back to the Fed’s 2% target.
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, Treasury yields 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 just below $86 and above $87, respectively.
In individual stocks, PepsiCo (PEP) shares rose almost 2% after the maker of Pepsi soda and Frito Lay snacks hammered Wall Street estimates for third quarter profit and raised its annual earnings forecast.
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AStocks close higher
Stocks closed the day in the green, but off of their highs earlier in the session, with the tech-heavy Nasdaq Composite (^IXIC) leading the day’s gains, up about 0.6%. The benchmark S&P 500 (^GSPC) climbed roughly 0.5% followed by the Dow Jones Industrial Average (^DJI) which inched about 0.4% higher.
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Oil prices settle slightly lower
Oil prices settled down on Tuesday after jumping the day before on investor fears over the latest conflict in Israel.
West Texas Intermediate (CL=F) crude settled down 0.64%, or $0.64, to close at $85.82 a barrel. Brent International (BZ=F) futures slid 0.66% to close at $87.56 as concerns surrounding supply began to ease.
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Real estate trade groups call on Fed to halt rate hikes
Housing woes continue to mount as the Federal Reserve’s higher-for-longer interest rate mantra threatens stability in the sector.
As Yahoo Finance’s Dani Romero reports:
The biggest real estate trade groups are calling on the Federal Reserve to rein in its interest rate efforts to prevent more volatility in the housing market.
In a letter to Fed Chair Jerome Powell this week, the Mortgage Bankers Association (MBA), the National Association of Realtors (NAR), and the National Association of Home Builders (NAHB) urged the Fed to state that it’s not considering further rate hikes and that it will hold off on selling any more mortgage-backed securities until the housing finance market stabilizes.
The move is the first time the groups have addressed the central bank directly since its rate-hiking campaign began in March 2022 and provides the latest sign of how “ongoing market uncertainty” around the Fed’s rate course is pummeling the housing market, which — the groups say — could spill over to the broader economy.
“This has exacerbated housing affordability and created additional disruptions for a real estate market that is already straining to adjust to a dramatic pullback in both mortgage origination and home sale volume. These market challenges occur amidst a historic shortage of attainable housing,” the groups wrote.
“Further rate increases…pose broader risks to economic growth, heightening the likelihood and magnitude of a recession.”
A Fed spokesperson had no comment on the letter.
Read more here.
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JInvestors increasingly bet on a Fed pause in November
Soaring bond yields might mean the Federal Reserve doesn’t need to hike interest rates at its November meeting.
In the past week multiple Fed officials the rise in bond yields are about “equivalent” to a rate hike as San Francisco Fed President Mary Daly put it last Thursday.
The news has sent investor bets heavily in favor of a Fed pause in November. As of Thursday afternoon, markets are pricing in a roughly 8% chance the Fed hikes interest rates in November. Last week, that probability was 28.2% while it had been a 43.6% chance a month ago.
But some Wall Street think Thursday’s inflation print could shake this up.
“Policymakers might take into account this additional tightening in financial conditions in the absence of further hikes,” JPMorgan chief US economist Michael Feroli wrote about the rise in rates on Oct. 6. “We think, so far, the balance of risks is tilted toward a hold at the next meeting.
“However, a firmer-than-expected inflation report next week might change this trade-off for them and they might feel compelled to do more.”
Economists surveyed by Bloomberg see headline inflation ticking down to 3.6% in September after prices increased by 3.7% in August.
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PepsiCo, Block, Beyond Meat: Stocks trending in afternoon trading
Here are some of the stocks leading Yahoo Finance’s trending tickers page in afternoon trading on Tuesday:
PepsiCo (PEP): Shares rose 2% in afternoon trading after the company beat Wall Street estimates for the third quarter. Sales gained in all business segments, except for Africa and the Middle East, bucking overarching concerns that the Ozempic craze would dent sales.
Block (SQ): The tech company jumped more than 4.5% after Bank of America analyst Jason Kupferberg maintained his Buy rating and said the stock’s recent pullback was “unjustified” and does not reflect potential upside.
Sunrun (RUN): Shares rose more than 11% as solar stocks bounced back from recent lows on the heels of France’s renewable energy push. The Invesco Solar ETF (TAN) also rose 5.5%, the largest intraday gain since May.
Akero Therapeutics (AKRO): Shares plunged nearly 65% after the biotechnology company reported mixed results for its initial trial of one of its lead drugs that treats fatty liver disease.
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Stocks 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.
Read more here.
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Rising 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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