Mixed Finish for Stocks as Chipmakers Climb and Financials Fall Amid Hawkish Fed Comments
Stock indexes settled mixed on Tuesday after a volatile session that saw chipmakers climb and financial stocks fall. The S&P 500 Index closed unchanged, while the Dow Jones Industrial Average fell by 0.36% and the Nasdaq 100 Index rose by 0.82%. This mixed finish came despite strength in chipmakers and AI stocks, which pushed the Nasdaq 100 to a record high.
Weaker crude oil prices eased inflation risks and boosted market sentiment. WTI crude oil fell more than 1% on Tuesday to a 3-week low after Japan's Kyodo News Agency reported that Iran has proposed to reopen the Strait of Hormuz within seven days if the US blockade is lifted. This news led to signs that diplomacy may bring an end to Middle East hostilities.
Markets are discounting a 53% chance of a +25 bp Fed rate hike at the next FOMC meeting on October 27-28. However, hawkish comments from Boston Fed President Susan Collins and Richmond Fed President Tom Barkin weighed on stocks and bonds. They warned that inflation may remain above the Fed's 2% target, suggesting they may favor additional Fed tightening.
Financial stocks slid on Tuesday, limiting gains in the broader market. Charles Schwab fell by more than 6%, while Raymond James Financials, JPMorgan Chase, Wells Fargo & Co, Bank of America, and Northern Trust all closed down by more than 3%. Energy stocks and service providers retreated after WTI crude oil fell more than 1% to a 3-week low.