Stocks rose as Treasury yields fell after comments from Federal Reserve officials bolstered speculation the central bank is heading toward another pause in interest rate hikes.
The S&P 500 approached 4,400, with some analysts citing a rebound from oversold levels. U.S.-listed Chinese shares like Alibaba Group Holding Ltd. and Baidu Inc. climbed after Bloomberg News reported the Asian nation is considering raising its budget deficit amid a new round of economic stimulus. PepsiCo Inc. gained on a bullish forecast. Amazon.com Inc. advanced as its fall sale for Prime subscribers kicked off Tuesday.
Treasuries gained, catching up with Monday's global government bond rally, when cash trading in the U.S. was closed. U.S. 10-year yields tumbled as much as 18 basis points to 4.62% before trimming their slide. Fed swaps currently show about a 60% chance the Fed will stay on hold in December, compared with 60% odds on another hike by then, just a week ago. The dollar fell for a fifth straight session, heading toward its longest losing streak since July.
While some observers believe that by year-end, the 30-year FRM would be lower than current levels, chatter about an 8% mortgage exists.
Top Fed officials are coalescing around the idea that tighter financial conditions after a recent surge in U.S. Treasury yields may substitute for additional increases in their benchmark interest rate. Fed Vice Chair Philip Jefferson said Monday that officials are in a position to "proceed carefully." And traders will be closely watching remarks from a slew of central bank officials Tuesday, including Raphael Bostic, Neel Kashkari, Christopher Waller and Mary Daly.
"Yesterday, multiple Fed officials, including vice Chair Jefferson, pointed out that the increase in bond yields has already delivered a significant tightening of policy," said Dennis DeBusschere, founder of 22V Research. "That reduces the need for marginal rate hikes. Those types of comments should reduce bond vol, and by extension stock vol, near term."
Global investors also kept a close eye on geopolitics. Israel's ruling coalition wants to form an emergency government with the opposition to tackle the nation's worst crisis in decades. As the conflict entered its fourth day, Israel said it's building a base for thousands of soldiers in preparation for the next phase of its retaliation.
The shekel regained its footing as the central bank dueled short sellers to contain the market fallout from Israel's conflict with militant group Hamas.
The currency strengthened as much as 1% in the first half hour of trading on Tuesday and traded little changed against the dollar as of 2:01 p.m. local time. The nation's benchmark stock index, which slumped 6.5% on Sunday, rose as much as 1.4%, before paring gains.
