U.S. stocks closed higher on Tuesday, with the S&P 500 and Nasdaq Composite posting their longest winning streaks in two years, as oil prices retreated and investors weighed comments from Federal Reserve officials.
What happened
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The Dow Jones Industrial Average DJIA rose 56.74 points, or 0.2%, to end at 34,152.60. It is the longest winning streak for the index since July 26, 2023, when it rose for thirteen consecutive trading days.
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The S&P 500 SPX gained 12.40 points, or 0.3%, to close at 4,378.38. It advanced seven sessions in a row, the longest winning streak since November 8, 2021.
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The Nasdaq Composite COMP advanced 121.08 points, or 0.9%, to close at 13,639.86, securing its longest winning streak since November 8, 2021.
What drove the markets
The extended rebound for stocks comes after a three-month slump that saw the S&P 500 and Nasdaq enter a market correction — down at least 10% from a recent high. But investors’ pessimism was exaggerated, Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, said in a note.
“While we see more near-term upside potential in fixed income, we believe the return outlook for equities is positive. We believe the relatively favorable backdrop for cash, fixed income, equities and alternatives makes this an opportune time to add to diversified, balanced portfolios,” she said.
Rising implicit borrowing costs have been the main driver of US stocks lately. The yield on ten-year government bonds BX:TMUBMUSD10Y,
It hit a 16-year high above 5% late last month but briefly fell below 4.5% on Friday after jobs data cooled. After recovering on Monday, it was trading around 4.57% on Tuesday.
Oil prices fell sharply on Tuesday, with the US benchmark CL.1
fell back below $80 a barrel and traded at the weakest level since August after Chinese data raised concerns about demand. Lower oil prices could help ease inflation concerns, analysts said.
Some investors see the market once again leading the way when it comes to the potential for Federal Reserve easing.
Markets are eyeing four rate cuts next year, the first of which has been pushed back to the May-June period, said Kent Engelke, chief economic strategist at Capitol Securities Management.
“Numerous Fed officials – including FRB Chairman Powell – will speak in the coming days. It is widely believed that these speakers will ‘push back’ this emerging narrative that the Fed is done, and that the first rate cut will happen in June,” he said in a note.
Late Monday, Minneapolis Fed Chairman Neel Kashkari said Fed officials have not discussed what it would take to cut rates.
Investors were right to be wary of expressing too much confidence that the Fed would soon shift to a dovish stance, said Jim Reid, a strategist at Deutsche Bank.
“[T]It is at least the seventh time this cycle that markets have responded remarkably to mild speculation. “It is clear that interest rates will not continue to rise forever, but on each of the previous six occasions we have seen hopes for short-term rate cuts dashed,” he said.
Fed Governor Christopher Waller on Tuesday called the rise in the 10-year yield an “earthquake” in central bank terms, according to reports.
“His comments need to be understood in context – they were not part of a policy discussion and would likely have been more hedged if they had been,” said Krishna Guha, head of the global policy and central bank strategy team at Evercore ISI, in a comment.
“But it still seems fair to dispel the impression that the Fed is not taking the position that all rate-driven tightening of financial conditions ended last week. That feels risk positive on the internet,” he wrote.
A slowdown in job creation in October was welcome news because it moved the labor market toward “more balanced” and sustainable growth, Chicago Fed President Austan Goolsbee said in a television interview.
The US trade deficit rose by 4.9% to $61.5 billion in September. Meanwhile, total consumer credit rose $9.1 billion in September, compared with a decline of $15.8 billion the previous month, the Federal Reserve said Tuesday. That translates to a 2.2% gain year-over-year, compared to a 3.8% decline in the previous month. Economists had expected an increase of $9.5 billion, according to the Wall Street Journal forecast.
Companies in focus
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Uber Technologies Inc.
UBER,
+3.70%
exceeded profit expectations, but fell short of forecasts with third-quarter revenue. Shares rose 3.7%. -
Shares of Datadog Inc.
DOG,
+28.47%
closed 28.5% higher after optimistic earnings expectations. Shares of MongoDB Inc.
MDB,
+11.04%
And Elastic NV
ESTC,
+6.53%
also showed an increase as the results eased fears about consumption-based software companies for the final quarter. -
DR Horton Inc.
DHI,
+2.93%
Shares rose 2.9% after the homebuilder’s fiscal fourth-quarter results beat Wall Street analysts’ profit and revenue expectations.