S&P, Nasdaq rise as oil prices slide, Dow wobbles
Wall Street's major indices rose on Tuesday, with the S&P 500 up 0.7% and the Nasdaq Composite up 1.3%, driven by a decline in oil prices. The Dow wobbled, gaining only 0.1%. The Energy sector fell 2.7% due to a 4.7% drop in Brent crude prices. Investors await key economic data, including Fed meeting minutes and inflation reports, which may influence interest rate expectations. Citi Economist Veronica Clark anticipates rate cuts in December, following a smaller cut in November, amid subdued inflation and a weakening labor market.
Wall Street's major equity averages were mostly higher Tuesday, finding some relief from a tumble in oil prices, while investors geared up for more data this week that should feed into the market's outlook for interest rates.
The S&P 500 (SP500) +0.7%, the Nasdaq Composite (COMP:IND) +1.3%, and the Dow (DJI) +0.1% but has darted between minor gains and losses. The Information Tech sector on the S&P 500 (SP500) +1.8%, with Nvidia (NVDA) among the advancers. Eight other sectors rose.
But the S&P 500's (SP500) Energy sector -2.7%, and the Materials Sector -0.5%, weighed by the slide in oil prices after the Chinese government on Tuesday refrained from implementing more major fiscal measures.
Brent crude (CO1:COM), the global benchmark, fell 4.7% to $77.15 a barrel, and WTI oil (CL1:COM) slumped 4.9% to $73.39 a barrel. China announcing a slate of stimulus measures helped propel both U.S. and Chinese stocks higher in late September. On the Dow (DJI) Tuesday, heavy equipment maker Caterpillar (CAT) fell the most, -2.5%.
On the market's docket this week are minutes from the Fed's September meeting, when it jump started rate cuts with a 50bp reduction, and the September consumer inflation report. Last Friday's surprisingly strong U.S. September jobs report prompted traders to expect fewer rate cuts in 2024.
"With this backdrop, another stronger 0.3% MoM increase in core CPI in September as we expect could stretch the pricing-out of rate cuts even more," Citi Economist Veronica Clark said in a note. "But we think the bar for the Fed to not cut rates at all in November is high," Clark said.
"Ultimately, we expect a still subdued inflation backdrop and a reemergence of weaker labor market trends in the next few months will have officials cutting rates by 50bp in December after a smaller 25bp cut in November," she said.
In the bond market, the 10-year Treasury yield (US10Y) was flat at 4.04% as it trades back above 4% for the first time in over two months. The 2-year yield (US2Y) was down 2 basis points to 3.99%.
Stocks fell on Monday as rising geopolitical tensions prompted investors to sell.