The market mood has turned somber on Tuesday, signaling that stocks could reverse some of the upside seen in the previous session. The bond yields have resumed their climb, with the 10-year U.S. Treasury note yield back above 4.7%, reflecting investor fears concerning further rate hikes. The earnings news flow of the day has started positively, with Johnson & Johnson (NYSE:JNJ) and Bank of America Corp. (NYSE:BAC) reporting better-than-expected results.

Traders may also look ahead to the economic data and Fed speeches scheduled for the day. The fluid political situation in the U.S. following the House Speaker post falling vacant and the geopolitical tensions in the Middle East could also remain an undercurrent.

Cues From Monday’s Trading:

Data that showed contraction in manufacturing activity in the New York region, optimism concerning the third-quarter earnings season, a decline in oil prices, and comments by Philadelphia Federal Reserve president Patrick Harker, which was construed as dovish by the market, fueled a rally on Monday. The major averages opened higher, and after a short consolidation move, they advanced further in late-morning trading. The indices moved roughly sideways for the remainder of the session before ending notably higher.

The Dow Industrials notched its second straight day of gains and looks on track to breach 34,000 for the first time since late September.

The rally was broad-based, with all S&P sector classes closing in the green. Communication services and consumer discretionary stocks made standout gains.

US Index Performance On Monday

Index	Performance (+/-)	Value
Nasdaq Composite	+1.20%	13,567.98
S&P 500 Index	+1.06%	4,373.63
Dow Industrials	+0.93%	33,984.54
Russell 2000	+1.59%	1,747.06

Analyst Color:

Stocks are poised for a year-end rally and a good 2024, said Wharton professor and noted economist Jeremy Siegel in his weekly WisdomTree commentary. He noted that earnings reports that have begun to trickle in have largely been solid, with no material signs of earnings downgrades.

“I like stocks at the present time—with earnings of just under $250 for the S&P 500,” the economist said. He said this renders the market’s valuation at 18 times earnings per share. “I think that is a favorable multiple for the market,” he added.

Siegel also said stocks are great long-term inflation hedges if one is still worried about inflationary risks. They can handle another quarter-point rise by the Fed if it deems it necessary, the economist said. He added that the recent underperformance of small-cap stocks was largely due to recessionary fears and the higher borrowing costs these companies may have to pay over large-cap companies.

Futures Today

Futures Performance On Tuesday

Futures	Performance (+/-)
Nasdaq 100	-0.20%
S&P 500	-0.20%
Dow	-0.23%
R2K	-0.47%

In premarket trading on Tuesday, the SPDR S&P 500 ETF Trust (NYSE:SPY) slipped 0.27% to $434.87 and the Invesco QQQ ETF (NASDAQ:QQQ) fell 0.29% to $368.35, according to Benzinga Pro data.

Upcoming Economic Data:

New York Fed President John Williams, a Federal Open Market Committee member, is scheduled to speak at 8 a.m. EDT.

The Commerce Department is due to release the retail sales report for September at 8:30 a.m. EDT. Economists, on average, expect the month-over-month retail sales growth to decelerate from 0.6% in August to 0.3% in September. Core retail sales may also have grown at a slower pace of 0.2% compared to August’s 0.6% growth.

The Federal Reserve is scheduled to release its industrial production report for September at 9:15 a.m. EDT. On a year-over-year basis, industrial output may have risen 0.1% in September compared to a 0.4% increase in August. The pace of growth in manufacturing output is expected to remain unchanged at 0.1%. Economists also expect capacity utilization to remain nearly unchanged at 79.6%.

Fed Governor Michelle Bowman will speak at 10:45 a.m. EDT.

The Commerce Department will release its business inventories report at 10 a.m. EDT. The consensus estimate calls for a 0.3% month-over-month increase in business inventories for August compared to unchanged inventory levels in July. Retail inventories may have increased at a faster clip of 0.6%.

Richmond Fed President Thomas Barkin, also a FOMC member, is due to make a public appearance at 10:45 a.m. EDT.

See also: Futures Vs. Options

Stocks In Focus:

• Viasat, Inc. (NASDAQ:VSAT) climbed over 5.50% in premarket trading after JPMorgan upgraded the stock.
• J&J added over 1.50% following a beat-and-raise quarter.
• Bank of New York Mellon Corp. (NYSE:BK), Goldman Sachs Group, Inc. (NYSE:GS), Albertsons Companies, Inc. (NYSE:ACI), and Lockheed Martin Corp. (NYSE:LMT) are among the companies due to report their earnings ahead of the market open.
• Those releasing their earnings after the close include JB Hunt Transportation Services, Inc. and United Airlines Holdings, Inc. (NASDAQ:UAL)

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures rose 0.15% to $85.39 in early European session on Tuesday following Monday’s 2.77% slide.

The benchmark 10-year Treasury note rose 0.048 percentage points to 4.758% on Tuesday.

The major Asian markets rallied on Tuesday, taking cues from the positive close by Wall Street overnight, with the Japanese and Hong Kong markets leading the gains. The rest of the major markets in the region showed tentativeness ahead of the Chinese GDP report due Wednesday.

European stocks were mixed in late-morning trading.

Photo by Pixels Hunter on Shutterstock

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