Market Summary
The S&P 500 Index ($SPX) (SPY) closed down by -0.16% on Tuesday. Meanwhile, the Dow Jones Industrial Average ($DOWI) (DIA) gained +0.44%, and the Nasdaq 100 Index ($IUXX) (QQQ) declined by -0.69%. In addition, December E-mini S&P futures (ESZ25) decreased by -0.20%, and December E-mini Nasdaq futures (NQZ25) fell by -0.75%.
Market Dynamics
U.S. stock indexes had a mixed closing on Tuesday, with the Dow recovering from its one-month low. The market faced pressure due to escalating U.S.-China trade tensions, as China imposed sanctions on five American units of South Korean shipbuilder Hanwha Ocean Co. This is part of a series of retaliatory actions, with both countries enforcing special port fees on each other’s vessels, impacting global trade, which relies heavily on maritime shipping. Additionally, President Trump suggested a potential halt to cooking oil imports from China in response to China’s refusal to buy U.S. soybeans.
Impact of Fed Comments
Bond yields decreased on dovish comments from Fed Chair Powell, which bolstered expectations for an interest rate cut at the upcoming FOMC meeting on October 28-29. Powell indicated a downward trend in labor market perceptions and hinted at the potential end of quantitative tightening. The yield on the 10-year T-note fell by -2 basis points to 4.02%.
Stock Highlights
Stocks received a boost from optimism surrounding artificial intelligence, particularly after Walmart’s 4% surge following its partnership with OpenAI. The increase in trade tensions sparked a flight to precious metals, pushing gold and silver prices to record highs. Global bond markets also witnessed increased demand for safety, leading to a decline in yields, including a drop in the 10-year German bund yield to a 3.25-month low.
Economic Indicators
Minor economic data showed a decline in the U.S. NFIB small business optimism index, falling -2.0 to 98.8, lower than the expected 100.6. The ongoing U.S. government shutdown is impacting market sentiment by delaying crucial economic reports, including unemployment claims and the September nonfarm payrolls report. Analysts predict that if the shutdown persists, significant furloughs could lead to increased jobless claims and a rise in the unemployment rate.
Global Market Trends
This week, attention will be on Q3 earnings as the reporting season kicks off. Expectations for rising corporate earnings provide a positive backdrop for stocks despite anticipated slower growth rates. Current forecasts indicate a 98% likelihood of a 25 basis point rate cut at the Fed’s next meeting. International markets also saw declines, with the Euro Stoxx 50 and China’s Shanghai Composite both closing lower.
US Stock Movers
Chipmaker and AI infrastructure stocks faced losses, with major names like Arista Networks and Intel both closing down more than -4%. The Magnificent Seven tech stocks also mostly dropped, with Nvidia declining more than -4%. On the other hand, Walmart led gainers following positive news about its AI partnership, and Wells Fargo saw a significant increase following strong quarterly revenue results.
