- Dow, Nasdaq and S&P 500 all finish higher
- PepsiCo (NASDAQ:PEP) beats expectations, raises guidance
- Rivian lifted by UBS upgrade
4:08pm: Dow wins for the third day in a row
The Dow closed Tuesday up 135 points, 0.4%, at 33,739, the Nasdaq Composite added 79 points, 0.6%, to 13,563 and the S&P 500 improved 23 points, 0.5%, to 4,358. The small-cap Russell 2000 index gained 24 points, 1.4%, to 1,780.
The Dow notched its third consecutive winning session bolstered by falling bond yields. The 10-year Treasury yield dropped more than 12 basis points to 4.655%.
“I think that move lower in yields has supported equity markets broadly. It may also be bringing relief to markets that perhaps there is some sort of peak in this rapidly upward moving yield in the last few weeks,” said Mona Mahajan, Edward Jones senior investment strategist. “There’s the kind of hope building that perhaps we are at the end of the Fed tightening cycle, as well as the rising rates.”
12:00pm: Stocks extend gains after more 'dovish' words
US stocks continued to put the foot on the accelerator extending early gains as bond yields eased.
At midday, the Dow Jones Industrial Average was up 262.68 points, 0.8%, at 33,867.33, the S&P 500 was up 46.65 points, 1.1%, at 4,382.31 and the Nasdaq Composite was up 162.67 points, 1.2%, at 13,646.91.
Federal Reserve Bank of Atlanta President Raphael Bostic reiterated that he doesn’t think policymakers need to raise interest rates any further and that policy is restrictive enough to bring inflation back to their 2% goal.
“I think that our policy rate is at a sufficiently restrictive position to get inflation down to 2%,” Bostic said Tuesday during a conversation held at the annual convention for the American Bankers Association. “I actually don’t think we need to increase rates anymore.”
Bostic's comments followed similarly 'dovish' comments from two other Fed officials on Monday, boosting hopes that interest rates could have peaked.
Stocks on the move include Rivian, up 5%, after UBS upgraded to buy.
9:40am: Bright start on Wall Street
US stocks made steady progress at the open lifted by falling bond yields as two Federal Reserve officials hinted interest rates may have peaked.
Shortly after the opening bell, the Dow Jones Industrial Average was up 70.67 points, 0.2%, at 33,675.32, the S&P 500 was up 8.84 points, 0.2%, at 4,344.50 and the Nasdaq Composite was up 16.52 points, 0.1%, at 13,500.76.
PepsiCo (NASDAQ:PEP) kicked off the big-cap reporting style in strong fashion delivering above forecast earnings and revenbue, sending shares 1.1% higher.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown said: "It’s been another solid quarter for Pepsi, which saw its top line bubble up at a time when consumers are really feeling the pinch. The group’s been leaving itself room to hit, and even surpass, its own guidance this year."
Elsewhere, there news that small business confidence has dipped to a four-month low.
Sentiment among small business owners was hit by continued concerns over inflation and persistent worker shortages, according to the National Federation of Independent Business (NFIB).
NFIB’s small business optimism Index fell by half a point in September to 90.8, which is the 21st month running below the 49-year average of 98.
Other stocks on the move included Electronic Arts, up 1.2%, after Bank of America upgraded to buy with a $150 price target.
7:00am: Futures point to a bright start on Wall Street
US stocks are expected to open higher after bond yields slumped after ‘dovish’ comments from two Federal Reserve officials and on reports China is to launch a fresh economic stimulus.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.2% higher, while those for the S&P 500 rose 0.2%, and contracts for the Nasdaq 100 futures were up 0.3%.
The vice-chair of the Federal Reserve said the US central bank needed to "proceed carefully" with forthcoming interest rate decisions.
Officials "are in a sensitive period of risk management", Philip Jefferson said in prepared remarks, needing to balance the respective risks of not tightening enough and being too restrictive.
His comments were similar to those from Dallas Fed President Lorie Logan, who noted that tighter financial conditions could mean the bank does less in terms of raising its policy rate.
Referring to the rise in bond yields, Logan said: "If term premiums rise, they could do some of the work of cooling the economy for us, leaving less need for additional monetary policy tightening to achieve the FOMC’s objectives."
Craig Erlam, senior market analyst, at Oanda explains that it "would appear the recent surge in bond yields hasn't gone unnoticed at the central bank, to the extent that Fed officials are coming across as less hawkish in their views."
"Higher yields have been cited by various policymakers in what appears to be a sign that they are a little uneasy about how much influence recent commentary has had," he pointed out.
The comments contributed to the biggest fall in US bond yields since March, alongside a move to safe haven assets given the Middle East conflict.
The yield on benchmark 10-year US Treasuries fell 18 basis points to 4.62% - the most since March - while the two-year bond yield dropped by its most since the end of August.
US bond markets had been closed on Monday for the Columbus Day holiday,
A further boost to equities came from a report on Bloomberg that China is considering raising its budget deficit for 2023 as the government prepares to unleash a new round of stimulus to help the economy meet the government’s annual growth target.
Bloomberg, citing people familiar with the matter, said policymakers are weighing the issuance of at least 1 trillion yuan ($137 billion) of additional sovereign debt for spending on infrastructure such as water conservancy projects.
Shares in PepsiCo (NASDAQ:PEP) rose 2.7% in pre-market deals after it reported quarterly earnings and revenue that beat analysts’ expectations and raised its outlook for its full-year earnings.
The soft drinks maker reported net income rose to $3.09 billion, or $2.24 a share, up from $2.70 billion, or $1.95 a share, in the same period a year ago.
Excluding nonrecurring items, core earnings per share of $2.25 were ahead of the FactSet consensus of $2.15, while revenue grew to $23.45 billion from $21.97 billion, also ahead of the FactSet consensus of $23.41 billion.
"For fiscal year 2024, we expect to deliver results towards the upper end of our long-term target ranges for both organic revenue and core constant currency EPS growth," the company said.
While, expect words from Fed officials Christopher Waller, Mary Daly, Neel Kashkari and Raphael Bostic to be scrutinised for their take on monetary policy ahead of inflation figures later this week.