Stock Market Today: Dow futures dip as Treasury yields near three-month highs

With just two weeks until Election Day, financial-market investors still seem uncertain about who will win the White House on Nov. 5.

History suggests the S&P 500 has delivered an average 1.2% advance in the two weeks leading up to Election Day. The large-cap benchmark index has also posted an average 1.4% gain in the week prior to the election, according to Dow Jones Market Data.

U.S. stocks have booked modest gains so far in October. The S&P 500 is up 1.3% this month, while the Dow has risen 1.4% and the Nasdaq Composite has gained 1.7% in the same period, according to FactSet data.

U.S. stocks remained modestly lower in midday trading on Tuesday as rising Treasury yields continued to weigh on risk assets.

The Dow Jones Industrial Average was wavering between gains and losses as of 1 p.m. Eastern time and trading at around 42,935, according to FactSet data.

The S&P 500 was losing 0.2% at 5,844, while the Nasdaq Composite remained flat at around 18,532, according to FactSet data.

There have been increased volatility in interest-rate markets but it is not excessive, said Tobias Adrian, the IMF’s financial counsellor, on Tuesday.

Interest-rate volatility is more elevated relative to the first decade after the 2008 Global Financial Crisis, Adrian said, at a press conference.

“We have seen volatile longer-term yields throughout the year but we don’t think that volatility is excessive relative to the fact that monetary policy has become more data dependent,” Adrian said.

“We’re back to levels that are more similar to pre-financial crisis,” Adrian said. In that era, the Fed didn’t guide the market about its rate decisions, he noted. Forward guidance started in 2004, he noted.

The Federal Reserve is likely to agree to two more quarter percentage-point rate cuts this year and four additional moves next year, said Pierre-Olivier Gourinchas, the IMF’s chief economist, on Tuesday. The easing will lower the Fed’s benchmark rate to a range of 2.75%-3%.

At a press briefing, Gourinchas said progress on inflation gives the Fed space to make sure that the last mile of getting inflation back to its 2% target doesn’t harm economic activity.

The severe stock market selloff in early August did not last long, but it has left an impressions with experts who are paid to worry about financial stability.

Experts at the International Monetary Fund have examined the early August market rout and said it was caused by a combination of bubbly market sentiment running into a wall of uncertainty over the economic outlook.

Low volatility and uncertainty function like two wires that when connected can cause a shock to the market.

Clear communication from policymakers and strengthening of macroprudential measures are needed to ensure financial markets remains stable in this environment, the IMF said.

What’s remarkable is that this rise for gold has occurred “despite conditions that typically work against gold, such as the U.S. dollar strengthening by 3% and the declining expectations for interest rate cuts by the Federal Reserve,” Rania Gule, senior market analyst at XS.com, said in market commentary.

However, economic and geopolitical conditions have played a major role in supporting this upward trend, with tensions in the Middle East adding “uncertainty for investors, which has enhanced gold’s appeal as a haven,” she said. The U.S. presidential election in November is also “increasing doubts, pushing traders to seek safer assets,” with gold, of course, being one of the most prominent.

On Comex, December gold was up $18.60, or 0.7%, at $2,757.50 an ounce after trading as high as $2,757.70. Based on the most-active contract, prices were up 33% year to date, poised for the largest yearly gain since 1979, according to Dow Jones Market Data. Silver for December delivery added 65.2 cents, or 1.9%, to $34.73 an ounce, on track for the highest finish since October 2012. It was up 44% for the year so far.

Verizon’s stock is heading for its third post-earnings decline after an earnings report that an Evercore ISI analyst deemed “healthy.”

While Verizon was largely ahead of or in line with expectations on key metrics, Evercore’s Kutgun Maral said in a note to clients that expectations had gotten elevated going into the report.

Verizon’s 4.2% stock decline Tuesday is the worst in the Dow Jones Industrial Average on the day, shaving 12 points off the index.

Although most sectors in the S&P 500 were down, the industrials sector took the biggest dive in early Tuesday trading.

The S&P 500 Industrials Sector Index was trading around 1.7% lower early in the day. The market-cap-weighted index was dragged down by companies like GE Aerospace, which missed third-quarter revenue estimates, sending shares of the company down 9.5%. Caterpillar Inc. and RTX Corp., two other companies in the sector, declined around 0.7% and 1.6% respectively.

Meanwhile, Uber Technologies Inc. was up around 0.9%.

Treasury yields have shot higher since the Federal Reserve’s 50 basis point jumbo interest-rate cut in September, as traders have scaled back expectations for how aggressively the central bank will move to lower borrowing costs in the future.

When yields rise, bond prices fall. But UBS Group still believes long-dated bonds like 10-year and 30-year Treasurys look attractive, given that the Fed is expected to gradually lower interest rates..

“We continue to recommend investors shift excess cash into quality fixed income as the rate-cutting cycle advances and erodes cash returns. In addition to IG bonds, which we rate as Attractive, investors can also consider diversified fixed income strategies—including selective exposure to higher-yielding parts of the asset class—as a way of further enhancing portfolio income,” said Solita Marcelli, chief investment officer Americas at UBS Global Wealth Management, in emailed commentary.

The yield on the 10-year Treasury note jumped more than 10 basis points on Monday, sending a shudder through the U.S. stock market. But the pace of the increase has eased as of Tuesday, with the yield on the benchmark note only modestly higher in recent trade. It stood at 4.194% in recent trade.

The auto maker’s stock topped the S&P 500’s gainers list, and was headed for the biggest one-day gain since it rallied 7.8% on Jan. 30.

It was also on track for the highest close since Feb. 3, 2022.

GM, which said it held the No. 2 position in electric vehicle sales, reported Q3 EPS that beat expectations for the ninth straight quarter, and by the widest margin since the first quarter of 2023.

Among its competitors, shares of Ford Motor were up 1.6%, while Tesla’s stock slipped 0.7%.