The Dow finished higher on Tuesday, as new Federal Reserve statements hinting at another halt in rate rises next month kept Treasury rates under control.
The Dow Jones Industrial Average climbed 0.6%, or 185 points, the Nasdaq gained 0.8
Points, and the S& P 500 gained 0.7%.
Fed officials continue to promote the “wait and see” strategy.
Raphel Bostic, President of the Atlanta Federal Reserve, reinforced hopes that the Fed would leave rates constant next month, saying “a lot” of the 11 rate rises issued since March 2022 had yet to be absorbed by the economy.
“I actually don’t think we need to raise rates anymore” to bring inflation back down to the Fed’s 2% target, Bostic said on Tuesday to the American Bankers Association.
According to Investing.com’s Fed Rate Monitor Tool, around 13% of traders expect the Fed to raise interest rates in November, down from 31% last week.
On Tuesday, Minneapolis Fed President Neel Kashkari reiterated Bostic’s views, saying it was “possible” that the recent spike in long-term Treasury rates, which has tightened financial conditions, may help the Fed fight inflation.
Higher long-term rates may do some of the job for us in terms of bringing inflation back down, Kashkari said, while he stopped short of advocating a rate freeze. If the present rise in long-term interest rates is driven by expectations of future Fed tightening, the Fed may be pushed to act on those predictions, he said.
The major section of the Treasury yield curve is continuing to unravel its inversion as recession concerns fade, with the 2-year rate over the 10-year Treasury rate falling to -29 basis points, the lowest level since March and far above the summer bottom of -106 bps.
Microsoft improves on Morgan Stanley support, while Palantir gains on a contract win.
Microsoft Corporation (NASDAQ: MSFT) lost ground despite Morgan Stanley reaffirming that the IT behemoth is a top selection due to its strengths in artificial intelligence, cybersecurity, and cloud computing.
Palantir Technologies Inc (NYSE: PLTR) gained 1% after the data software company received a new contract worth around $250 million from the United States Army.
Boeing gains despite a drop in third-quarter deliveries.
Boeing Co (NYSE: BA) climbed more than 3% despite reporting a drop in third-quarter deliveries of new airline jets due to continued manufacturing issues with its 737 MAX jets.
In the third quarter, the business delivered 105 planes, down from 112 in the same period last year.
Boeing (NYSE: BA) claimed in a separate statement that it supplied 1,000 smart bombs to Israel as the latter escalated its retribution against Hamas.
PepsiCo succeeds on the earnings front.
PepsiCo (NASDAQ: PEP) gained over 2% after posting quarterly earnings that exceeded expectations on both the top and bottom lines. The food and beverage firm increased its annual earnings projection to 13% from 12% earlier.
Pepsi’s revised outlook “will mark the third consecutive year of digital digit EPS growth, outpacing its HSD long-term target,” according to Wedbush.
Trust leads the way higher on transaction news; banks are up ahead of reports later this week.
Trust Financial Corp (NYSE: TFC) gained more than 6%, leading the wider financials sector higher after Semafor reported that the company is in discussions to sell its brokerage division to private equity firm Stone Point for around $10 billion.
The bank rise comes as JPMorgan and other Wall Street banks prepare to begin their quarterly results season in earnest on Friday.
Bank sentiment has also been boosted by the unwinding of the inverted yield curve, which improves banks’ lending operations because banks tend to borrow money at the short end of the curve and lend long.
