Dow Pauses, Bond Yields Hold Higher, Tesla Falls—and What Else Is Happening in the Stock Market Today

Higher than expected inflation could prompt the Federal Reserve to raise rates sooner rather than later.

Karen Bleier/AFP/Getty Images

The stock market was pausing Tuesday as bond yields remained elevated from recent levels, with investors looking ahead to retail sales data that could feed further into concerns around inflation.

Futures for the Dow Jones Industrial Average indicated an open around 10 points lower, after the index declined 12 points Monday to close at 36,087. Futures for the S&P 500 and Nasdaq signaled a similar start.

Overseas, Hong Kong’s Hang Seng Index rose 1.3% while in London the FTSE 100 underperformed its continental European peers, slipping 0.1%. The pound strengthened 0.4% against the dollar —hitting large, U.K.-listed multinationals—after the British unemployment rate fell more than expected.

The greatest force capturing investor attention continues to be inflation, and the debate over whether rising prices are transitory or more long-lasting. 

U.S. October retail sales data later in the day are expected to feed this debate, with expectations for year-over-year growth of 1.5%, up from 0.7% in September. A strong reading could stoke fears of more persistent inflation and raise the prospect of a rate increase by the Federal Reserve sooner rather than later.

“Today’s main risk event and potential market shaker will be the U.S. retail sales data for October,” said Lukman Otunuga, an analyst at broker FXTM. 

“A report that meets or exceeds market expectations may fuel expectations over the Federal Reserve raising interest rates sooner than expected,” Otunuga added. “Traders are currently pricing in a 43% probability of at least one rate hike by early May 2022 and an 82% probability by mid-June next year. It will be interesting to see whether a robust retail sales report boosts the odds of a rate hike in May.”

Also adding weight to stocks were bond yields, which remained elevated from recent levels, with the yield on the benchmark 10-year Treasury note holding firm at 1.6%. Higher bond yields tend to discount the present value of future profits, pressuring stock valuations.

On the geopolitical front, investors also welcomed the virtual summit between President Joe Biden and China’s Xi Jinping late Monday—their first formal meeting of Biden’s presidency. Early indications from the White House suggested the meeting was positive, though no major updates on hot-button issues such as tariffs were given.

“There has been no mentions of tariffs being discussed but we’ll likely hear more detail later on so keep your eyes peeled,” said Jim Reid, a strategist at Deutsche Bank. “At first glance it seems like it was a cooperative meeting but with little of substance likely to have come out of it. We will see.”

In cryptocurrency markets, Bitcoin was down around 9% to near $60,000, according to price data from CoinDesk, with Ether prices having fallen more than 10% to near $4,200.

Here are three stocks on the move Tuesday

Vodafone (VOD) shot up 5.4% in London, after the telecommunications group reported 6.5% growth in adjusted core earnings in the first half of the year—ahead of expectations.

Drinks giant Diageo (DEO) was up 2.3% in London, after giving new medium-term guidance at its capital markets day, including expecting organic sales growth to rise between 5% and 7% for fiscal 2023–2025, up from 4% to 6% during 2017–2019.

Tesla ( TSLA ) was down 1.6% in the U.S. premarket trade. The stock has been under pressure in recent days as CEO Elon Musk has been selling down his stake.

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