U.S. stocks edged higher Tuesday, stabilizing following the previous session’s losses after a bumper payrolls report created doubts over the Federal Reserve’s plans to cut interest rates sharply.
At 09:35 ET (13:35 GMT), Dow Jones Industrial Average rose 70 points, or 0.2%, S&P 500 climbed 26 points, or 0.5%, and NASDAQ Composite gained 75 points, or 0.4%.
Bets on a smaller rate cut saw Wall Street register steep losses on Monday, with the S&P 500 down nearly 1%, the NASDAQ Composite fell 1.2% and the Dow Jones Industrial Average dropping nearly 400 points, or 0.9%, retreating from record highs.
Rising Treasury yields also weighed, with the benchmark 10-year Treasury yield above 4% on Tuesday, while the two-year yield hovered near its highest in more than a month.
Risk sentiment was also dented by fears of an escalation in the Middle East conflict, while the U.S. braced for another big hurricane -Milton – which is expected to make landfall this week.
Fed speakers out in force
There is little in the way of economic data due Tuesday to influence interest rate expectations, although the minutes of the September meeting are due on Wednesday and the September consumer price index on Thursday, with investors watching for any signs of inflation remaining sticky.
However, the week is peppered by Fed speakers, including later Tuesday Boston Federal Reserve President Susan Collins and Atlanta Fed President Raphael Bostic.
Traders are currently pricing in an 80.9% chance the Fed will cut rates by 25 basis points in November, and a 19.1% chance the central bank will not cut rates at all, CME Fedwatch showed.
Traders were also seen pricing in a higher terminal rate for the Fed’s current easing cycle.
The central bank slashed rates by 50 bps in September and announced the start of an easing cycle. But it still flagged a data-dependent approach to future rate cuts.
PepsiCo publishes Q3 results
In corporate news, PepsiCo (NASDAQ:PEP) stock rose 0.2% after the soft drinks giant reported third-quarter earnings beat expectations but its revenue fell short of estimates as the company faced subdued category performance in North America and international business disruptions.
Honeywell (NASDAQ:HON) stock rose 2% after the Wall Street Journal reported that conglomerate is planning to spin off its Advanced Materials business.
Alphabet (NASDAQ:GOOG) is also in the spotlight after its Google unit was ordered by a US judge to reconfigure its Android operating system to allow rivals to make their own app marketplaces and payment options, marking a setback for the tech giant’s defense against antitrust claims.
Crude hands back some gains
Oil prices fell Tuesday as traders banked some profits following a strong rally on the back of concerns that an all-out war in the Middle East will hit supplies from the oil-rich region.
Muted reactions to the comments from the state economic planner in China — the world’s biggest oil importer — also weighed on crude.
By 09:35 ET, the Brent contract slipped 3.1% to $78.39 per barrel, while U.S. crude futures (WTI) traded 3.2% lower at $74.66 per barrel.
Both contracts rose over 3% on Monday to their highest levels since late August, adding to last week’s rally of 8%, the biggest weekly gain in over a year.
The latest U.S. crude oil inventory data, from the American Petroleum Institute, is due later in the session, with analysts expecting stocks to rise by 1.9 million barrels.
(Ambar Warrick contributed to this article.)
