U.S. stocks turned higher Tuesday, rising in concert with Treasury yields and the dollar, as investors looked to test the market's conviction on peak interest rates ahead of a key three-day stretch for the bond market that includes $112 billion in new sales.
Stocks have rallied hard since last week's Federal Reserve rate decision in Washington, when Chairman Jerome Powell appeared to suggest the end of near-term tightening amid easing inflation pressures.
That view was given added fuel by a softer-than-expected October employment report, which showed solid job gains and moderating wage growth, suggesting the economy could be heading towards the so-called 'soft landing' where inflation fades but recession in avoided.
The pullback in Treasury yields those two event triggered helped the interest rate sensitive Nasdaq go on a run of seven consecutive session gains, despite disappointing outlooks from some of its mega-cap constituents, marking the longest winning streak since January.
Late Monday comments from Minneapolis Fed President Neel Kashkari, however, and a modest moves higher in Treasury bond yields, are testing market bets that the Fed is finished with its rate hike cycle.
"We haven’t completely solved the inflation problem," Kashkari told Fox News. "We still have more work ahead of us to get it done ... I'm a little nervous about declaring victory too soon."
Benchmark 2-year notes bumped 2basis points higher from Monday levels to change hands at 4.926% in early New York trading, with 10-year notes eased to 4.585%, still well south of last week's levels but moving in a direction that could headwinds to stocks for the remainder of the week.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.341% higher at 105.660.
In the meantime, investors will focus on today's $48 billion auction of 3-year notes as the Treasury begins its first series of beefed-up bond sales heading into the final months of the year.
Investor bids totaled around $128.2 billion, or around 2.67 times the amount of offer, with foreign investors taking around 64.6% of the overall sale. Both figures represent solid gains from a similar auction of 3-year notes in early October.
Around $112 billion in 3-year and 10-year notes, as well as 30-year bonds, will be auction this week as part of the Treasury's new funding plans as it cover the maturity of $102.2 billion in Treasury bills on November 15.
On Wall Street, the S&P 500 was marked 14 points higher in early afternoon trading while the Dow Jones Industrial Average gained 70 points.
The Nasdaq was up 125 points amid the pullback in Treasury yields and solid moves higher for chip stocks, as well as earnings from Uber Technologies UBER before the bell and Ebay EBAY and Rivian RIVN after the close.
The third quarter earnings season has been largely a pleasant surprise, outside of muted near-term forecasts from mega-cap tech stocks such as Apple AAPL, with collective S&P 500 profits now forecast to rise 5.7% from last year to $483.6 billion.
With around four-fifths of the benchmark reporting so far, 81.6% have topped Street earnings forecasts, a pace that's well ahead of the 73.6% pace over the prior four quarters and the long-term average of around 66.5%.
Profits are set to rise by around 7% from last year's levels over the three months ending in December, as well, to a share-weighted $465 billion, according to LSEG data.
In Europe, the Stoxx 600 was marked 0.15% lower by the close of Frankfurt trading, with banks stocks providing some support following a bigger-than-expected third quarter loss for UBS that was offset by $22 billion in new wealth management inflows.
In Asia, China stocks were mixed following a varied October trade report showing a surprise jump in imports, but a much larger decline in global exports, underscoring the uneven post-Covid recovery in the world's second-largest economy.
The region-wide MSCI ex-Japan benchmark fell 1.15% into the close of trading, while Japan's Nikkei 225 ended the session 1.34% lower in Tokyo.
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