On Tuesday, US benchmark equity indexes experienced notable gains as traders carefully assessed the recent statements made by Federal Reserve Governor Adriana Kugler. The Nasdaq Composite achieved a significant rise of 1.5%, closing at 18,182.9. Meanwhile, the S&P 500 also saw a positive movement, advancing by 1% to settle at 5,751.1.
The Dow Jones Industrial Average added 0.3% to its value, ending the day at 42,080.4, with technology stocks leading the surge in market performance. In contrast, only the energy and materials sectors faced declines during the session. Governor Kugler expressed her willingness to endorse further reductions in the central bank's benchmark lending rate, provided that inflation trends continue positively as anticipated.
She emphasized a data-driven approach to any policy decisions, stating, "Still, my approach to any policy decision will continue to be data-dependent and to rely on multiple and diverse sources of data to form my view of how the economy is evolving." In a move reflective of their economic stance, the Federal Open Market Committee lowered interest rates by 50 basis points the previous month. On Tuesday, the US two-year Treasury yield dropped four basis points to 3.96%, while the 10-year yield decreased by one basis point to settle at 4.02%.
These movements in yields highlight a cautious optimism in the bond market. Anticipation is mounting for government data set to be released on Thursday, indicating that US consumer inflation is expected to have increased by 0.1% on a sequential basis and 2.3% year-on-year last month, as per forecasts gathered by Bloomberg.
Deutsche Bank commented on the inflation outlook, stating, "Our expectations are for declines in energy prices to keep the (sequential) gains in headline consumer price index more muted than those for core. Should our expectations hit the mark, the year-over-year growth rate of headline CPI would drop by 30 basis points to 2.3%, while that for core would tick down a tenth to 3.2%." Additionally, the US producer prices report for September is scheduled for release this coming Friday, which will provide further insight into inflation trends. Despite these overall improvements, small business optimism in the US rose less than anticipated last month as ongoing inflation concerns weighed on business owners, according to the latest survey from the National Federation of Independent Business. Furthermore, the US trade deficit showed positive signs in August, shrinking as exports increased while imports fell, according to government data.
Oxford Economics commented on this development, noting, "The resolution of the dockworkers strike earlier this month ensures supply chain disruptions would be minimal and removes a key risk to trade outlook." In the commodities market, West Texas Intermediate crude oil experienced a drop of 4.5%, closing at $73.7 a barrel.
Market analysts at D.A. Davidson remarked, "A rally in oil prices paused as traders awaited a response from Israel to last week's Iranian rocket attacks." On the corporate front, Palo Alto Networks ($PANW) shares rose by 5.1%, making it the top performer on the Nasdaq and among the best performers on the S&P 500, following Goldman Sachs raising its price target on the stock from $376 to $425 while maintaining a buy rating.
Conversely, PepsiCo ($PEP) adjusted its full-year organic revenue growth forecast downward, even as the beverage and snacks company reported third-quarter earnings that surpassed Wall Street predictions, despite sales not meeting market expectations. The company's shares ended the day 1.9% higher. Super Micro Computer ($SMCI) saw significant declines on both the Nasdaq and S&P 500, decreasing by 5% in value. In terms of precious metals, gold prices fell by 1%, concluding at $2,640.60 per troy ounce, while silver experienced a decline of 3.5%, closing at $30.89 per ounce.
In summary, the market showed robust performance amid various corporate developments and insights from economic data, while external factors such as international trade dynamics continued to shape the financial landscape..