On Tuesday, US equity indexes exhibited mixed trading patterns following midday as investors were poised for a wave of earnings reports, carefully considering the effects of the recent increase in government bond yields. The S&P 500 slipped slightly to 5,850.2, while the Dow Jones Industrial Average saw a marginal increase of 0.1%, reaching 42,987.2, and the Nasdaq Composite traded 0.2% higher at 18,580.9.
Notably, sectors such as industrials and materials were among the primary decliners, with consumer staples and energy sectors showing strength during intraday trading. Last week saw both the S&P 500 and the Dow achieve new record highs, raising optimism among investors about the overall market trajectory. In the bond market, most US Treasury yields experienced an increase during the midday session, with the 10-year yield climbing 3 basis points to 4.2%, approaching its highest level since the end of July.
Meanwhile, the two-year yield increased by 2 basis points to 4.05%, marking its strongest position since mid-August. A sell-off in bonds has been attributed to the rise in Treasury yields, which has placed pressure on rate-sensitive stocks, as highlighted in a note from D. A. Davidson. Investors are currently anticipating a significant influx of corporate earnings this week, particularly from the technology sector, in hopes of gaining clearer market direction. In the realm of economic data, the Richmond Federal Reserve's monthly manufacturing index demonstrated improvement, climbing to minus 14 in October from a previous minus 21 in September, which fell short of the expectations of minus 17 surveyed by Bloomberg.
In contrast, the Philadelphia Federal Reserve Bank's monthly nonmanufacturing activity index rebounded significantly to 6.0 in October, rising from minus 6.1 in the previous month, surpassing the forecast of 4.1 from Bloomberg's survey. Looking forward, the International Monetary Fund has updated its outlook for the US economy, projecting a 2.8% growth in 2024, following a 2.9% increase in 2023.
This marks an upward revision from the earlier 2.6% growth estimate for 2024 made in July. However, a slowdown to 2.2% growth is anticipated for 2025, which also represents an upward adjustment from the 1.9% growth forecast previously issued. Derek Holt, head of capital markets and economics at Scotiabank, commented on the market conditions, stating, 'Markets are scaling back the overshoot on Fed rate cut expectations as both data and Fed-speak emphasize more gradual reductions than had been priced.' Moreover, as former US President Donald Trump's electoral chances against Vice President Kamala Harris appear to have risen recently, market sentiment reflects a 'greater unease' regarding the implications of his fiscal, trade, and immigration strategies on inflation and issuance outcomes. In commodity markets, gold prices rose 0.8%, reaching $2,760.82 an ounce, while silver surged by 2.8% to $35.02, with both precious metals hitting new 52-week highs during intraday trading.
San Francisco Fed President Mary Daly, speaking at the Wall Street Journal's TechLive conference in Laguna Beach, California, expressed confidence in the potential continuation of interest rate reductions, stating, 'So far, I haven't seen any information that would suggest we wouldn't continue to reduce the interest rate.' As of Tuesday afternoon, market expectations indicate a 91% probability of a 25 basis-point interest rate cut at the upcoming Fed policy meeting on November 7, with only a 9% likelihood of pausing easing measures, effectively ruling out a 50 basis-point reduction for next month. In company-specific news, Genuine Parts ($GPC) reported a decline in Q3 adjusted diluted earnings and subsequently lowered its full-year 2024 adjusted EPS guidance range, resulting in a significant 20% drop in shares, making it the poorest performer on the S&P 500 for the day.
Conversely, General Motors ($GM) showcased a year-over-year increase in Q3 adjusted earnings and revenue, exceeding market expectations, leading to a robust 9.2% gain in shares, positioning it as the leading performer on the S&P 500. However, Verizon Communications ($VZ) faced a 4.8% decline in share value, emerging as the steepest decliner on the Dow after revealing a year-over-year fall in Q3 adjusted earnings and operating revenue.
Additionally, West Texas Intermediate crude oil prices surged by 2.5%, reaching $72.35 per barrel..