Despite the recent volatility, the market has experienced notable gains in October, with the S&P 500 reaching a record high, pushing its year-to-date growth to over 22%. Tuesday’s losses, however, could mark the first back-to-back declines for the index since early September.
Technically, if 5850.00 fails as support, traders will start looking for a correction into the 50-day moving average at 5726.08.
Rising Yields Fuel Uncertainty
Traders are increasingly concerned about the Federal Reserve’s approach to future rate cuts, with Treasury yields continuing their upward trend. The 10-year Treasury yield climbed to 4.20% early Tuesday, following an 11-basis-point jump in the previous session. Similarly, the 2-year yield rose to 4.04%.
This surge in yields comes as Federal Reserve officials express caution about future rate cuts. On Monday, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan both advocated for a patient and deliberate approach to reducing rates. Kansas City Fed President Jeff Schmid echoed these sentiments, supporting a cautious outlook for further rate cuts, especially after the Fed’s half-point reduction in September.
Strong economic data has contributed to higher yields, further clouding the outlook on rate cuts. The market is pricing in a higher probability of only one additional Fed rate cut this year, with a quarter-point reduction expected at the November 7 meeting. However, traders see only a 33% chance of another cut in December, according to the CME’s FedWatch tool.
Earnings Season: Key Stocks in Focus
While interest rate concerns loom, the earnings season continues to pick up pace. About 14% of S&P 500 companies have already reported their quarterly results, with over 70% surpassing analysts’ expectations.