On Tuesday, Wall Street experienced fluctuating fortunes as the American economy presented indications that it remains robust, despite slight provocation for the Federal Reserve’s unease.
The S&P 500 nudged downwards by 0.43, an insignificant decrease of less than 0.1%, taking the total to 4,373.20 following mercurial gains and losses throughout the day. An increment of 13.11 points, or less than 0.1%, bore the Dow Jones Industrial Average to 33,997.65, while the Nasdaq composite slightly depreciated by 34.24, or 0.3%, landing at 13,533.75.
Receding anxieties over the potential influence of Middle-Eastern war and escalating oil prices on global financial markets, have recentered attention on the typical pillars of long term stock market performance: the economy’s future direction, corporate profits, and interest rates.
A report disclosed on Tuesday that American retail shoppers spent a considerable amount beyond the expected economic projections last month, manifesting a thriving economy backed by a stable job market, which is anticipated to bolster corporate profits.
However, an overheating economy may inadvertently fuel inflation, prompting the Federal Reserve to maintain high interest rates to curb it, which could negatively affect the cost of stocks and other investments. It’s a precarious endeavor for the Fed, aiming to temper the economy just sufficiently to mitigate ascending inflation without inducing a harsh recession.
The report’s release witnessed Treasury yields in the bond market elevate, with the yield on the 10-year Treasury advancing to 4.83% from Monday’s close at 4.69%.
The escalation of the 10-year yield since the summer has burdened the stock market, as traders acknowledge the Fed’s projections of potentially prolonged high rates. The Federal Reserve has already hoisted its primary interest rate to its peak since 2001 and is mulling a further increase.
High rates and yields pose a potential threat to stock prices, affecting primarily companies that have been amplified due to future growth expectations and those perceived as expensive. This scenario usually targets Big Tech stocks; the 4.7% plunge for Nvidia and the 0.9% dip for Apple were the most significant strain on the S&P 500.
The U.S. government’s broadened restrictions to obstruct China’s access to advanced computer chips and the corresponding manufacturing equipment pressured Nvidia and other chipmakers further.
Meanwhile, several major U.S. corporations were ascending following their latest promising earnings reports. Bank of America spearheaded the market with a 2.3% gain after surpassing Wall Street’s profit predictions for the third quarter, citing raised interest rates as a contributing factor. However, their CEO Brian Moynihan cautioned of a persistent slowdown in American spending.
Added to the winners’ list was Bank of New York Mellon, boasting a 3.8% rise following stronger than anticipated profit for the recent quarter.
Across the board, companies listed on the S&P 500 index are projected to return to profit growth for the first time in a year, following the summer season.
In the hospitality sector, Wyndham Hotels & Resorts enjoyed a 9% increase after rival Choice Hotels International proposed a purchase at $90 per share in cash and stock, valuing the company at $7.8 billion.
Although Wyndham rejected the offer, C. Patrick Scholes of Truist Securities suggested that the hotel chain might be awaiting a more generous offer from Choice or another party.
Internationally, European stocks demonstrated modest movement, while Asian indexes reported more substantial rises. Meanwhile, crude oil prices experienced fluctuating fortunes on fears of major oil-producing countries becoming embroiled in Middle Eastern conflicts resulting in disruptions to supplies.
As for the war in Gaza, Andrew Lipow, president of Lipow Oil Associates, offered his perspective. “I think they’re just waiting,” he said, expressing concern over the potential impact on infrastructure.
