US stocks moved higher on Tuesday as investors welcomed a pullback in surging oil prices, putting focus back on the ongoing debate over the economy and interest rates.
The benchmark S&P 500 (^GSPC) stepped up around 0.7%, while the tech-heavy Nasdaq Composite (^IXIC) rose around 1.2% as tech megacaps recouped the previous session’s losses. The Dow Jones Industrial Average (^DJI) edged up roughly 0.2%.
Stocks are set to pick up on the winning trend of recent months as Monday’s headwinds ease, with oil prices retreating as Mideast tensions cool somewhat.
Some “Magnificent Seven” stocks regained ground lost amid negative headlines, with Amazon (AMZN), Apple (AAPL), and Alphabet (GOOG, GOOGL) all nudging higher. Meanwhile, Nvidia (NVDA) built on a closing gain, rising another 4% on Tuesday, as the chip heavyweight’s partner Hon Hai pointed to “crazy” AI demand.
Those comments sharpened investors’ focus on the CPI inflation report due Thursday, which will provide further clues on the path forward for interest rates.
In corporates, PepsiCo (PEP) got the ball rolling on earnings season, posting a surprise drop in quarterly revenue and lowering its forecast for 2024 sales growth. Shares of the snack and drinks giant ticked up slightly in afternoon trading.
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Why this earnings season will drive a ‘muted market reaction’
The third quarter earnings reporting period will kick off in earnest when some of the nation’s largest banks report quarterly results on Friday.
Wall Street projects earnings to grow 4.7%, which would mark the fifth straight quarter of growth since the same period a year prior. But it would also be the slowest year-over-year growth since the fourth quarter of 2023.
Given stocks have charged higher than normal between reporting periods, Deutsche Bank chief equity strategist Binky Chadha isn’t expecting the typical 2% rise in the S&P 500 (^GSPC) during the first four weeks of earnings reports.
“Earnings seasons are typically positive for equities, but the strong rally and above-average positioning going in argue for a muted market reaction,” Chadha wrote in a note to clients.
China stock rally loses steam as stimulus hopes fade
The recent surge in Chinese stocks hit the pause button on Tuesday after Beijing failed to roll out another large stimulus package, a surprise to investors hoping to add more fuel to the unprecedented rally.
Stocks in Hong Kong’s Hang Seng Index (^HSI) dropped around 9% on Tuesday, its worst day since Oct. 2008, after climbing around more than 20% on the heels of China unleashing its most aggressive monetary stimulus since the pandemic.
The stimulus, a response by China to course-correct its struggling economy, was first announced on Sept. 24. Since then, a surge of inflows has dramatically boosted Chinese equities, particularly in real estate and consumer staples, as investors bet on Beijing’s comeback.
At a press conference on Tuesday hosted by China’s top economic planner, the National Development and Reform Commission (NDRC), Beijing said it’s committed to enacting further support in order to reach its economic goals, which includes an annual growth target of “around 5%.”
On Tuesday, the Shanghai Composite (000888.SS) still eked out gains of around 5% despite an initial climb of around 10% after markets reopened from the country’s weeklong holiday. The index has rallied by double digits, jumping more than 20% from its September lows. It’s up about 30% over the past month.
Similarly, shares of Chinese e-commerce giants like Alibaba (BABA) and PDD Holdings (PDD) have surged over that same period, up more than 35% and 55%, respectively, despite single-digit losses on Tuesday.
(Courtesy: Yahoo Finance)
Oil tanks 4% as run-up over Israel-Iran tension pauses, China stimulus disappoints
Oil sank on Tuesday as the recent rally stemming from the Middle East conflict took a pause, and China disappointed investors on its stimulus.
West Texas Intermediate (CL=F) tanked more than 4.5% while Brent (BZ=F), the international benchmark price, also slipped more than 4.5%.
The reversal comes after crude futures surged about 12% over the past five sessions on speculation that a retaliatory move from Tel Aviv against Tehran in the ongoing Middle East conflict could involve targeting Iran’s oil infrastructure.
“The delayed response by Israel to counterattack could mean further talks may happen first,” Dennis Kissler is senior vice president of trading for BOK Financial Securities said in a note on Tuesday.
“Oil futures had moved to an “overbought” condition and without underlying escalation of attacks a corrective phase looks underway,” he added.
Oil also came under pressure after a Chinese economic planner told reporters Beijing is “fully confident” the country will meet its 2024 targets but made no mention of any large or new measures, signaling stalled demand from the world’s largest oil importer.
Apple iPhone 16 spending ‘more positive’ than expected but concerns remain: KeyBanc
Apple’s iPhone 16 (AAPL) may have had more momentum out of the gate than its predecessor, according to KeyBanc analysts. But it’s not enough to quell concerns about sales overall.
KeyBanc analysts said in a note Tuesday that spending on the iPhone 16 in the first 10 days after its launch in September was 12% higher than it was in the same period following the iPhone 15’s rollout.
KeyBanc based its conclusions off data from nearly 2 million KeyBank credit and debit card customers, looking at Apple transactions greater than $400.
KeyBanc said the data “does appear more positive than we would have anticipated.” But analysts said iPhone 16 demand faded quickly: “We saw initial strong demand for iPhone 16, but momentum tailed off.”
“The data should calm concerns on the September quarter, though does little to change our more cautious view on the ‘super cycle,’ as upgrade rates are likely to continue to decline.”
So far, Wall Street has perceived the iPhone 16 launch as somewhat weak. Analysts have cited shorter shipping times for the iPhone 16 than past iPhones. In other words, demand must be weaker if people are waiting less to get their new iPhones.
The benchmark S&P 500 (^GSPC) and tech-heavy Nasdaq Composite (^IXIC) each climbed around 0.5%, while the Dow Jones Industrial Average (^DJI) edged up roughly 0.3%.
Oil prices, which have surged amid Middle East tensions, retreated early Tuesday. Crude oil (CL=F) fell about 3% to trade just below $75 a barrel.
PepsiCo cuts 2024 sales outlook as snack business lags
PepsiCo (PEP) lowered its sales outlook for the year, forecasting organic revenue growth in the low single digits below the previously expected 4% growth. As Yahoo Finance’s Brooke DiPalma reports, PepsiCo’s third quarter revenue trailed behind Wall Street’s estimates, coming in at $23.3 billion, versus the $23.8 billion expected.
CEO Ramon Laguarta said in the release that Pepsi’s performance was impacted by “subdued category performance trends in North America,” the impact of recalls at Quaker Foods North America, and business disruptions from “rising geopolitical tensions in certain international markets.” In a phone interview with Yahoo Finance, Laguarta said consumers are “very challenged” and they are making a “lot of trade-offs” when it comes to food. Those trade-offs are weighing on the snacks business most acutely, Laguarta explained.
PepsiCo stock fell nearly 1% in premarket trading. Read the full story here.
