S&P 500, Nasdaq rise as investors focus on inflation data, Q3 earnings

By Lisa Pauline Mattackal and Pranav Kashyap

(Reuters) - Wall Street's main indexes opened higher on Tuesday, as investors shifted their attention to the upcoming third-quarter earnings season and inflation data for hints on the Federal Reserve's future rate decisions.

The Dow Jones Industrial Average rose 11.06 points, or 0.03%, to 41,965.30, the S&P 500 gained 21.50 points, or 0.38%, to 5,717.44 and the Nasdaq Composite gained 90.10 points, or 0.50%, to 18,014.00.

All three major indexes had tumbled roughly 1% on Monday, pressured by surging Treasury yields, escalating Middle East tensions, and a re-evaluation of U.S. rate expectations.

"We did (a) see strong sell off yesterday so it's not unnatural to see a slight bounce, particularly as there's a vacuum of fresh data today," said Fiona Cincotta, senior market analyst at City Index.

Nine of the 11 S&P 500 sectors were trading in the green, with energy stocks losing over 2% as oil prices fell after Monday's rally. [O/R]

The two-year Treasury yield retreated slightly from Monday's highs, but the yield on the benchmark 10-year note remained above 4%, as strong economic data last week prompted investors to trim their rate cut bets.

Traders have priced in a nearly 86.7% chance of a 25 basis point interest rate cut from the Fed at its November meeting, according to CME FedWatch.

"We do see an upside to Treasury yields in the very short term, it has the potential to pressure equities since they're trading at such high valuations," said Cameron Dawson, chief investment officer at NewEdge Wealth.

The CBOE Volatility index , Wall Street's "fear gauge," retreated from Monday's highs, but was still trading around one-month high at 22.

Markets will closely monitor consumer price index data, due this Thursday, for more clues on the path of interest rates.

The Dow Jones Industrial underperformed, pressured by an over 2.5% drop in shares of Caterpillar (NYSE:CAT ).

The materials sector fell 0.9% to an over two-week low, as metal prices slipped on waning optimism over China's stimulus measures.

U.S.-listed shares of Chinese companies also slid, tracking losses in domestic stocks. Shares of Alibaba (NYSE:BABA ) Group, JD (NASDAQ:JD ).com and PDD Holdings slumped between 6.3% and 7.5%.

Roblox dropped 6.6% after Hindenburg Research on Tuesday disclosed a short position in the gaming platform.

Fed Governor Adriana Kugler said earlier on Tuesday she supported further interest rate cuts if inflation continues to ease, as she expects.

A number of other Fed officials are expected to speak later in the day, including Raphael Bostic, Susan Collins and Philip Jefferson.

Major banks are scheduled to kickstart the third-quarter earnings season this Friday. The estimated Q3 earnings growth rate for the S&P 500 is 5%, according to LSEG estimates.



Advancing issues outnumbered decliners by a 1.03-to-1 ratio on the NYSE. There were 34 new highs and 12 new lows on the NYSE. On the Nasdaq, declining issues outnumbered advancers by a 1.04-to-1 ratio.

The S&P 500 posted 13 new 52-week highs and one new low, while the Nasdaq Composite recorded 21 new highs and 36 new lows.

Source: Investing.com