Stocks turned positive in midday trading on Tuesday after retail sales data smashed expectations and earnings season picked up steam.
The Dow Jones Industrial Average (^DJI) inched 0.3% higher, or about 100 points, after falling roughly 130 points at the open. Contracts on the benchmark S&P 500 (^GSPC) and the tech-heavy Nasdaq 100 (^NDX) also recovered from earlier losses, up around 0.3% and 0.2%, respectively.
The 10-year Treasury yield somewhat eased, but still jumped roughly 9 basis points to trade around 4.81%. The 10-year yield hit a 16-year high of 4.89% on Oct. 6.
Retail sales rose 0.7% in September from the previous month, more than double Wall Street's estimates for 0.3% growth, the latest data out Tuesday showed. The surprise reading reflects continued resilience in the American consumer despite predictions of a slowdown.
In earnings, Bank of America (BAC) reported a 10% rise in profit, echoing last week's strong showing by peers. Goldman Sachs (GS) is another highlight in Tuesday's third quarter reports, with Lockheed Martin (LMT), Johnson & Johnson (JNJ), and United Airlines (UAL) also on the docket.
Earnings season is still in its early days, but there are already encouraging signs that corporate America could be seeing an end to the recent earnings recession. Tesla (TSLA) and Netflix (NFLX) lead out tech sector results on Wednesday, giving more insight into the toll taken from higher borrowing costs.
Read more: What a Fed rate-hike pause means for bank accounts, CDs, loans, and credit cards
Meanwhile, the Middle East conflict still weighed on the market as investors assessed the chances of it breaking out into a wider war. The rising geopolitical tensions in the Middle East could drive a global recession, leading investors have warned.
News that President Joe Biden plans to visit Israel on Wednesday and then travel to Jordan has eased some worries driven by a looming Israeli ground offensive on Gaza, seen as a red line for its Arab neighbors.
Oil prices steadied as the US intensified its diplomatic efforts and as hopes grew that the US will ease sanctions on producer Venezuela. Crude oil futures (CL=F) held above $86 a barrel, while Brent crude futures (BZ=F) traded at about $90 a barrel.
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ANvidia, BofA, General Motors: Stocks trending in afternoon trading
Here are some of the stocks leading Yahoo Finance’s trending tickers page in afternoon trading on Tuesday:
Nvidia (NVDA): Shares of the chipmaker somewhat steadied from earlier losses, but were still down about 3.5% after the Biden administration increased its restrictions around the sale of semiconductors from American companies to China. Other stocks like Advanced Micro Devices (AMD) and VMware (VMW) also fell on the news, down roughly 1% and 6%, respectively.
Bank of America (BAC), Goldman (GS): Shares of big banks Bank of America and Goldman Sachs moved in opposite directions on Tuesday following a mixed bag of earnings. Bank of America rose about 3% after the company reported a boost in Q3 profits, while Goldman sank more than 1% as Q3 profits fell.
Johnson and Johnson (JNJ): Shares traded flat despite the company reporting a third quarter beat on both the top and bottom lines on Tuesday, in addition to raising its full-year guidance. The report was the company's first earnings release since spinning off its consumer health business, Kenvue (KVUE).
General Motors (GM): Shares were flat after the company revealed it will delay its EV production plan, which includes the conversion of its Orion Assembly plant to EV truck production, to late 2025. The car maker cited "evolving EV demand," while also revealing the move will help it "better manage capital investment."
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Stocks turn positive
Stocks reversed early morning losses by mid-afternoon trading on Tuesday.
The Dow Jones Industrial Average (^DJI) inched 0.3% higher, or about 100 points. The benchmark S&P 500 (^GSPC) rose about 0.3% while contracts on the tech-heavy Nasdaq 100 (^NDX) climbed roughly 0.2%.
At current levels, the Dow and S&P 500 are set for their highest close since September 20, the day before the Federal Reserve established its higher-for-longer interest rate mantra.
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Bond yields soar
Treasury yields jumped on Tuesday after strong retail sales data added to investor concerns that higher-for-longer interest rates are here to stay.
The yield on the benchmark 10-year Treasury (^TNX) jumped roughly 12 basis points to trade around 4.83%. The 10-year yield hit a 16-year high of 4.89% on Oct. 6.
The 30-year yield (^TYX) climbed about 7 basis points to trade near 4.94% while the 5-year yield (^FVX) rose 13 basis points to trade around 4.85%.
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Resilient consumer keeps pressure on the Fed
A hot jobs market is boosting consumer spending.
Retail sales rose 0.7% in September from the previous month, more than double Wall Street's estimates for 0.3% growth, according to new data from the Commerce Department on Tuesday. Retail sales have now grown from the month prior for six-straight months, marking a consistent trend of consumer spending.
This, economists say has been supported by an average of nearly 270,000 nonfarm payroll additions over the same period. With no clear signs of the labor market fully cooling, the strong position of the US consumer entering the fourth quarter of 2023 could provide upside risks to inflation and therefore more Fed rate hikes.
"The economy is entering Q4 with more momentum than we previously thought," Oxford Economics lead US economist Michael Pearce wrote in a research note on Tuesday. "The risks to our forecast for a slight contraction in consumption in Q4 are firmly to the upside. The strength of the economy also means that Fed officials will leave the door open for additional rate hikes."
Fed Chair Jerome Powell has noted in the past that a stronger US economy could mean more Fed rate hikes.
"We’re not looking for a decrease in consumer spending," Powell said on September. "It’s a good thing that the economy’s strong...If the economy comes in stronger than expected, that just means we’ll have to do more in terms of monetary policy to get back to 2 percent [inflation]—because we will get back to 2 percent."
Over the past week, Fed officials eased market concerns of another interest rate hike from the central bank as they explained how credit tightening caused by rising bond yields could effectively take the place of another Fed rate hike. The discussion provided reprieve for bond yields and stocks rallied.
But that shifted on Tuesday. Markets are now pricing in a roughly 40% chance that the Federal Reserve hikes interest rates at its December meeting, up from a 25% chance just a week ago, according to the CME FedWatch Tool. Stocks opened lower after the report too, while bond yields rose. The 10-year Treasury yield breached 4.85%, its highest level in more than a week and just off its 16-year highs.
“Today’s strong report along with a recent string of positive economic surprises suggest the economy carried more momentum than previously thought over the summer," EY-Parthenon Senior Economist Lydia Boussour wrote in a research note on Tuesday. "This will keep the Federal Reserve on high inflation alert, and though it won’t tilt the Federal Open Market Committee toward another fed funds rate hike at the November meeting, the December meeting will very much remain a ‘live’ one.”
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Semiconductors fall on Biden crackdown
The Biden administration is upping its restrictions around the sale of semiconductors from American companies to China.
Chip stocks like Nvidia (NVDA), Advanced Micro Devices (AMD) and VMware (VMW) all fell on the news, down roughly 6%, 3% and 8%, respectively, as the broader tech space lags the overall market.
The crackdown is the latest effort by US officials to limit China's access to AI chips, further escalating tensions between the two countries as the technology war intensifies.
US Commerce secretary Gina Raimondo said the goal is to curb China’s access to "advanced semiconductors that could fuel breakthroughs in artificial intelligence and sophisticated computers that are critical to (Chinese) military applications."
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Bank of America, Goldman report mixed earnings
Big banks like Bank of America (BAC) and Goldman Sachs (GS) reported mixed results on Monday as earnings season kicks into high gear.
As Yahoo Finance's David Hollerith reports:Third quarter profits at Bank of America were up 10% from a year ago, as the second-largest US bank got a boost from higher interest income and a strong performance from its Wall Street unit.
It reported earnings of $7.8 billion and revenue of $25.2 billion, which was up 3% from a year ago. Its net interest income, which measures the difference between what it makes on its loans and pays for its deposits, rose 4% year over year.
Its trading and investment banking revenues were also up, a sign that a slump in dealmaking is starting to thaw.
Meanwhile, third quarter profits at Goldman Sachs fell as the Wall Street giant continued its costly retreat from consumer banking and tried to recover from a prolonged slump in dealmaking.
Its earnings were $2.06 billion, down 33% from $3.07 billion a year ago. That result was affected by a $506 million write-down on GreenSky, a specialty lender it agreed to sell, and $358 million in impairments on real estate investments.
Its performance during the quarter trailed other big-bank rivals JPMorgan (JPM), Bank of America (BAC), Citigroup (C), and Wells Fargo (WFC), all of which reported profit increases year over year.
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The consumer slowdown was nowhere to be found in September
The American consumer keeps surprising Wall Street.
New data from the Commerce Department released Monday showed retail sales rose 0.7% in September from the previous month, more than double Wall Street's estimates for 0.3% growth. Sales excluding auto and gas increased 0.6%, above estimates for a 0.1% increase compiled by Bloomberg. Meanwhile, August's sales were revised up to 0.8% from a previously reported 0.6% increase.
The September report, offers a snapshot of consumer spending at a time when economic data has been coming in largely stronger than expected despite the Federal Reserve's interest rate hiking campaign as the central bank seeks to cool inflation.
Nine of the 13 categories highlighted in the release saw increases from a month ago while sporting goods was the lone category unchanged from August. Sales at miscellaneous store retailers led all categories, shooting up 3% from August. Sales at nonstore retailers popped 1.1% while motor vehicle & parts dealers sales were the other leader, rising 1% from September.
The biggest laggards were electronics & appliance stores as well as clothing sales which both dropped 0.8% compared to the month prior.
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BofA, Lockheed, and Wyndham: Stocks trending in premarket trading
Here are some of the stocks leading Yahoo Finance’s trending tickers page in premarket trading on Tuesday:
Bank of America Corporation (BAC): Bank of America stock rose over 1% premarket. The second-largest US bank saw its profits rise by 10% after getting a boost from higher interest income and a strong performance from its Wall Street unit, as reported by Yahoo Finance's David Hollerith.
Lockheed Martin (LMT): Shares fell by over 1% on Tuesday in premarket trading. The group reported higher third quarter revenue on Tuesday as geopolitical tensions fueled demand for its military equipment.
Wyndham (WH): Shares in Wyndham rose 12%. Choice Hotels said on Tuesday that it has offered to buy Wyndham Hotels in a potential near-$10 billion deal.
Ericsson (ERIC): Shares fell over 4% after the company reported downbeat earnings and said it expected the uncertainty impacting its mobile networks business to persist into 2024.
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Stock futures fall as earnings season picks up pace
The major Wall Street stock gauges pointed lower Tuesday as reports from Bank of America and Johnson & Johnson got the week's stream of earnings under way.
Futures on the Dow Jones Industrial Average (^DJI) were down 0.18%, or 61 points, while S&P 500 (^GSPC) futures shed 0.23%. Contracts on the tech-heavy Nasdaq 100 (^NDX) were 0.27% lower.
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