Michael M. Santiago
U.S. stocks and longer-end Treasuries on Tuesday pared their gains after a closely-watched 7-year note auction disappointed investors.
Wall Street’s major averages had ticked higher earlier on positive comments from Federal Reserve speakers and a host of economic data.
The blue-chip Dow (DJI) was holding onto slight gains of 0.12% at 35,374.45 points in afternoon trade. The tech-heavy Nasdaq Composite (COMP.IND) had reversed course and was now lower by 0.12% to 14,224.10 points. The S&P 500 (SP500) had also slipped into the red, now down 0.10% to 4,545.77 points. The benchmark index on track for its best month since July 2022.
Of the 11 S&P sectors, five had moved into negative territory, led by Health Care. Utilities topped the winners.
A $39B 7-year note auction tailed by a significant margin, pointing to low demand. Auctions for longer-end maturities in recent weeks have come in mixed, sparking concerns about the demand for bonds. The 30-year yield (US30Y) was now up 1 basis point to 4.54%, having been down 2 basis points earlier. The 10-year yield (US10Y) was now down 2 basis points to 4.37%. The shorter-end more rate-sensitive 2-year yield (US2Y) was largely unaffected, down 12 basis points to 4.77%.
See live data on how Treasury yields are doing across the curve at the Seeking Alpha bond page.
Wall Street’s main indexes had opened lower but a speech by Fed Governor Christopher Waller at the American Enterprise Institute after the start of regular trading proved as a positive catalyst to sentiment. Waller said that data for October had indicated an easing in economic activity, and forecasts for the fourth quarter were showing the kind of moderation that is more in keeping with progress on lowering inflation.
“(Waller’s) comment that if progress on inflation continues for several more months, it would warrant lower interest rates is a game-changer. It may mean that the Fed may be comfortable with CPI staying higher than 2% to guarantee a ‘soft landing.’ Thus, the YC can bull steepen,” Althea Spinozzi, senior fixed income strategist at Saxo Bank, said on X (formerly Twitter).
Separately, Fed Governor Michelle Bowman at an event in Salt Lake City, Utah said that she continued to see “an unusually high level of uncertainty” in current economic conditions. Bowman’s baseline economic outlook continues to expect a need for further rate hikes.
Tuesday’s economic calendar also showed an increase in the Conference Board’s gauge of consumer confidence for the first time in four months.
In other economic indicators, the S&P CoreLogic Case-Shiller Home Price Index and the FHFA House Price Index for September both rose M/M, but decelerated from August. Finally, a Richmond Fed survey showed that Fifth District manufacturing activity slowed in November.
Turning to Tuesday’s active movers, Pinduoduo-owner PDD (PDD) was the top percentage gainer on the Nasdaq Composite (COMP.IND) after delivering a quarterly top and bottom line beat.
Morgan Stanley (MS) slipped after the bank’s stock was downgraded by Societe Generale.
Image and article originally from seekingalpha.com. Read the original article here.