U.S. and Canadian major stock indexes closed modestly higher on Tuesday, as investors scrutinized a mixed bag of earnings at big U.S. companies and digested comments from Federal Reserve policy makers for clues about its first planned interest-rate cut. Investors were also cautiously monitoring more weakness in U.S. regional banks that have considerable exposure to the commercial real estate sector.
Minneapolis Fed President Neel Kashkari said the U.S. central bank is “not done yet” with inflation although he noted it had come down quickly with three-month and six-month inflation data “basically” at the Fed’s 2% goal.
Also, Cleveland Fed President Loretta Mester said that if the U.S. economy performs as she expects this could open the door to rate cuts. But Mester said she was not ready yet to suggest timing for easier policy due to inflation uncertainty.
On Sunday, Fed Chair Jerome Powell dashed any remaining hopes for a March rate cut. He had said the Fed can be “prudent” in deciding when to cut with a strong economy allowing time to build confidence that inflation is under control.
“The big macro news today is a couple of Fed governors confirming what Powell said over the weekend. It’s putting a little damper on markets today. It’s a little follow through from yesterday,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.
Stocks were down for much of the session before rising just ahead of the close.
John Praveen, Managing Director & Co-CIO at Paleo Leon, said the Fed should not wait too long to ease policy as troubles at regional Bank NY Community Bancorp spotlight weakness in the rate-sensitive commercial real estate sector.
Powell also referred to the sector on Sunday. On Tuesday, U.S. Treasury Secretary Janet Yellen said she was concerned about commercial real estate stresses on banks and property owners, yet she believes the situation is manageable with assistance from bank regulators.
The KBW Regional Banking index finished down 1.4%, marking a 12.6% drop over six sessions. New York Community Bancorp shares ended down 22.2%. The lender has lost about 60% of its value since it reported a surprise quarterly loss last week citing write-offs for some real estate clients.
A pullback in bond yields after two straight days of hefty increases provided some comfort to equity investors Tuesday. The Canada 10-year was down 6.1 basis points at 3.447% by late afternoon, after earlier touching its highest level since Jan. 29 at 3.519%.
The Dow Jones Industrial Average rose 141.24 points, or 0.37%, to 38,521.36. The S&P 500 climbed 11.42 points, or 0.23 %, to 4,954.23 and the Nasdaq Composite gained 11.32 points, or 0.07 %, to end at 15,609.00.
Airlines helped advance the Dow Jones Transport Average, which closed up 2.1%, with signs of strong air travel demand. Frontier Group Holdings’ rallied 20.8% after it surprised investors with a break-even financial report.
With over half of S&P 500 companies now having reported earnings, 81.2% surpassed expectations, according to LSEG data. Overall S&P 500 earnings are expected to have risen 8.1% in the fourth quarter from the year-ago quarter.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 85.85 points, or 0.4%, at 20,957.74. On Monday, the index posted its biggest decline in nearly three weeks.
Industrials rose 0.7% and heavily weighted financials were up 0.6%. The energy sector rallied 0.7% as the price of oil settled 0.7% higher at US$73.31 a barrel.
Gains for energy were led by Precision Drilling Corp . Its shares rose 5.3% after the company reported its fourth-quarter results.
The materials group, which includes which includes precious and base metals miners and fertilizer companies, added 0.5% as the price of gold rose.
Technology was the only major sector to end lower in Toronto, falling 0.4%.
In the U.S., GE HealthCare Technologies finished up 11.6% after the medtech firm posted better-than-expected fourth-quarter earnings, driving the S&P 500 healthcare sector to an all-time high.
The materials index was the biggest gainer among the S&P 500′s 11 major sectors. It gained 1.7% with shares in chemicals firm DuPont de Nemours jumping 7.4% after it beat fourth-quarter profit estimates, announcing a $1 billion share-repurchase program and hiking its dividend.
Palantir Technologies shares soared 30.8% after forecasting upbeat annual profit.
However, Eli Lilly closed down 0.2% even after forecasting 2024 profit above estimates.
Chip stocks pressured the tech-heavy Nasdaq with the Philadelphia SE Semiconductor index ending down 1%. Rambus Inc led declines in the sector as its shares plunged 19.2% after its quarterly report.
Advancing issues outnumbered decliners by a 2.6-to-1 ratio on the NYSE. There were 190 new highs and 64 new lows on the NYSE.
On the Nasdaq 2,721 issues advanced and 1,476 declined as Advancing issues outnumbered decliners by a 1.8-to-1 ratio on the Nasdaq. The S&P 500 posted 27 new 52-week highs and 8 new lows while the Nasdaq recorded 110 new highs and 122 new lows.
On U.S. exchanges 11.21 billion shares changed hands compared with the 11.54 billion average for the last 20 sessions.
Reuters, Globe staff