S&P 500 closes lower, notches 5-day losing streak ahead of key inflation report

Stocks fell Tuesday, with two major averages falling for the fifth day in a row, as investors look ahead to a key inflation report Wednesday.

The S&P 500 slipped 0.65% to close at 3,588.84 after rebounding from a multiyear low earlier in the session. The Nasdaq Composite fell 1.10% to 10,426.19, its lowest close since July 2020. Tuesday's losses notched the fifth day in a row of declines for both indexes.

The Dow Jones Industrial Average rose 36.31 points, or 0.12%, to close at 29,239.19, bolstered by jumps in Amgen and Walgreens Boots Alliance.

—Carmen Reinicke

November lumber futures climbed more than 5% Tuesday, reaching $485.20 per thousand board feet, a three-week high, but remain lower by 58.6% on the year.

December copper contracts gained almost 1%, limiting this year's slide to 22.4%, the steepest decline since 2015.

WTI and Brent crude oil futures rose for a second day, bringing their year-to-advance to 18% and 21%, respectively.

Natural gas futures advanced for the first day in four, bringing the 2022 rally to 77%.

Aluminum is off about 20% in 2022 while gold is down nearly 8%.

— Scott Schnipper, Gina Francolla

The Tuesday afternoon swoon for stocks has brought a handful of names to new 52-week lows.

• AT&T (T) trading at lows not seen since March 2003
• Booking Holdings (BKNG) trading at lows not seen since Nov. 2020
• Bank of NY Mellon (BK) trading at lows not seen since Nov. 2020
• First Republic Bank (FRC) trading at lows not seen since Dec. 2020
• Truist Financial (TFC) trading at lows not seen since Nov. 2020
• Accenture (ACN) trading at lows not seen since March 2021
• CDW Corp (CDW) trading at lows not seen since March 2021
• Cognizant Technology (CTSH) trading at lows not seen since July 2020
• Juniper (JNPR) trading at lows not seen since May 2021

For Bank of NY Mellon, the decline comes on the same day the company announced that it launched a custody platform for digital assets, meaning some clients can now store their bitcoin with the bank.

— Jesse Pound, Christopher Hayes

Earnings growth for the S&P 500's third quarter should come out to between 6% and 7%, according to Brad McMillan, chief investment officer for Commonwealth Financial Network. That would be below expectations of 9.9% from earlier this summer but better than the current FactSet forecast of 2.4%.

He made that prediction because the "economy isn't as bad as expected" with a strong labor market and rebounding consumer spending. But he remained wary of the impacts of inflation, foreign exchange rates and the worker shortage on companies in the index.

"All of these will weigh on earnings, although likely not as much as currently estimated," McMillan said. "We will get a win here, but probably not that big of a win."

The FactSet estimate would make for the lowest period of growth since the third quarter of 2020, when it contracted 5.7%, he said.

"This is a very healthy growth rate, given current conditions, and should help act as a cushion for markets going forward," he said of his 6% to 7% estimate. "It is not the growth we have gotten used to, but slow growth is better than no growth."

— Alex Harring

Bank of England Governor Andrew Bailey reportedly told pension fund managers that the central bank will wrap up its emergency bond market support program by Friday, noting they should rebalance their positions by then.

"We think the rebalancing must be done and my message to the funds involved and all the firms involved managing those funds: you've got three days left now. You've got to get this done," Bailey said at an event in Washington, according to Reuters.

U.S. stocks rolled over after those comments, with the S&P 500 and Nasdaq down more than 1% each. The Dow, which was up 400 points at one point, was last down 71 points.

— Fred Imbert

Third-quarter results will be released in full force over the next few weeks, but some of the most valuable information investors can get will be in the form of fourth-quarter guidance.

Fourth-quarter earnings estimates for the S&P 500 have already been reduced in half since July 1. Wall Street expects Q4 earnings for S&P 500 companies to rise 5.2%. That's down from the projected 10.6% growth three months ago, according to Refinitiv.

Within that, four S&P 500 sectors — communication services, financials, consumer discretionary and materials — are already projected to show earnings contraction in the fourth quarter. Another three — consumer staples, tech and health care — are on the brink of joining them.

CNBC Pro subscribers can read the full story here.

— Robert Hum

The charts of Tesla, Ark Innovation ETF and bitcoin are all at an inflection point that could mean more selling if key levels are broken.

That could have implications for the broader market.

Jonathan Krinsky, chief market technician at BTIG, says all three are testing key chart areas that look ready to break, taking prices lower. They are all on the "cusp of cracking key levels," he says.

Tesla is trading just above the important $220 level. Ark briefly fell below the key $35 level Tuesday, but rebounded. That was the May low, and Ark has tested that level several times. Bitcoin is nearing a test of $18,000, Krinsky notes.

Krinksy said the group's behavior backs his call for more downside for the S&P 500, which got as low as 3,568 Tuesday. "I do think the S&P 500 is vulnerable to 3,400," he said. "I'm not bearish on the S&P simply because of these charts, but they do add to the conviction."

--Patti Domm

Ritholtz Wealth Management CEO Josh Brown had harsh words for the Federal Reserve on CNBC's "Halftime Report."

"This is a body of people who one year ago today were telling us, based on their forecasts, that there would be no rate hikes in 2022. None," Brown said. "We have just had the fastest, most severe rate hiking cycle that most people in the market have ever seen."

"They have no idea, and they have zero credibility. The only thing worse than the Fed's forecast is no forecast, which is why cling to these things, but in reality they don't know what they're going to do," he added.

— Jesse Pound

Tuesday's rally isn't necessarily a sign of relief in the markets, according to Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

After four consecutive declining sessions, markets were due for a bounce, he said. In addition, many of the sectors that are outperforming Tuesday are defensive, such as health care, consumer staples and utilities.

"The kinds of stocks doing well today are the kind of stocks that would do well in a recession," said Zaccarelli.

While investors "have to be happy if the market is higher," they should take these moves "with a grain of salt," Zaccarelli said.

—Carmen Reinicke

These companies are making headlines in midday trading.

• Amgen — The biopharma stock jumped 6.2% after Morgan Stanley upgraded Amgen to overweight from equal weight, saying Amgen is "largely derisked" and provides defensiveness for investors.
• Walgreens Boots Alliance — Shares of the drugstore chain jumped nearly 4%, giving the Dow Jones Industrial Average a boost. Walgreens' rally came after the company announced an acquisition of healthcare firm CareCentrix. The stock is still down about 36% on the year. Walgreens is set to report its quarterly earnings on Thursday.
• Uber, Lyft — Shares of the rideshare companies dropped 7% and 8%, respectively, after the Labor Department proposed a new rule that could pave the way for gig workers to be reclassified as employees rather than independent contractors. The proposal could raise costs for the companies, who rely on contract workers to drive on their own schedules.

Check out more midday movers here.

— Sarah Min

U.S.-listed shares of Credit Suisse fell more than 2% after Bloomberg News reported that the embattled European bank was facing a U.S. tax investigation and a Senate inquiry. The stock is now down more than 54% year to date.

Credit Suisse later confirmed the report, saying in a statement:

"Credit Suisse does not tolerate tax evasion. We have implemented extensive enhancements since 2014, to root out individuals who seek to conceal assets from tax authorities. ... Credit Suisse is cooperating extensively with US authorities, including the US Senate and US Department of Justice, and will continue to do so."

— Fred Imbert

The three biggest U.S. banks by assets each hit fresh 52-week lows Tuesday on concern that an economic downturn will force the companies to build reserves for bad loans.

JPMorgan Chase, Bank of America and Citigroup set the new lows just days before the industry kicks off third-quarter earnings on Oct. 14.

While the outlook for banks' revenue from interest income has actually been improving as the Federal Reserve increases rates, that has also spooked investors concerned that the Fed will inadvertently trigger a recession. JPMorgan CEO Jamie Dimon added to the concerns Monday when he told CNBC that the U.S. was likely headed towards a recession by next year.

"There is a disconnect between near-term fundamentals and stock performance because the key driver of strong fundamentals is the continued rise in interest rates," JPMorgan banking analyst Vivek Juneja said Tuesday in a research note. "However, [the] sharp rise in rates is raising concerns about a hard landing (recession.)"

Investors are waiting for banks to "rip off the proverbial Band-Aid" and begin to build loan loss reserves commensurate with a recession, as well as revise deposit costs higher, UBS bank analyst Erika Najarian said Tuesday in a note.

Fund managers are "waiting for a more `cathartic' moment that would signal the stocks have troughed," said Najarian.

—Hugh Son

With the potential for a recession next year, with Sandi Bragar, chief client officer at Aspiriant, said equity values could fall with a wide range given the uncertainty.

"It's a coin flip of whether we're in a recession or not next year," she said. "Knowing that, we think there's a wide range of fair values for equities given the macro situation."

Her comments echo the sentiment across Wall Street and among retail investors, as market participants feel increasingly uneasy over a potential recessionary period coming with the Federal Reserve continuing to increase interest rates in a bid to hamper inflation.

But she also said there's "money to be made" for investors aware of how the market is moving.

"There's cash on the sidelines that's eager to get to work," she added. Investors know that there's a lottery payoff if you can time the market with when the Fed will pivot."

— Alex Harring

Cleveland Federal Reserve President Loretta Mester cautioned Tuesday that a slowing economy combined with tightening monetary policy could produce a recession ahead.

"With growth well below trend over the next couple of years, it is possible that a shock could push the U.S. economy into recession for a time," the central bank official said in remarks prepared for a speech in New York.

Nevertheless, Mester said tackling inflation is paramount if the U.S. economy is going to achieve sustained growth with full employment and stable prices.

"Despite some moderation on the demand side of the economy and nascent signs of improvement in supply side conditions, there has been no progress on inflation," she said. "None of this is painless, but the high inflation we are experiencing is already inflicting pain on many people," Mester added.

She said she is advocating an even higher trajectory for interest rates than the median outlook of other Fed policymakers as she is concerned that the Fed has not made progress in its inflation fight.

Mester, who is a voting member of the rate-setting Federal Open Market Committee, said the danger of doing too little to halt inflation is greater than the danger of doing too much that likely will slow growth.

—Jeff Cox

The S&P 500 and Nasdaq posted large rebounds Tuesday, reversing earlier losses that pushed the S&P 500 to a multiyear low and the Nasdaq to a 52-week low.

At midday, the S&P 500 was up 0.21% and the Nasdaq rose 0.02% to trade flat. The Dow Jones Industrial Average was up about 260 points, or 0.89%.

—Carmen Reinicke

Amgen shares jumped 5.6% during day trading after Morgan Stanley upgraded the biopharmaceutical company's stock because of its "defensive positioning."

The firm upped its price target to $279 from $257, which would mean it would trade about 22.2% higher than where it did at Monday's close.

Analyst Matthew Harrison wrote in a Tuesday note to clients the optimistic outlook stemmed from the differentiation potential of obesity medication AMG133 and AMJEVITA, which is used for multiple inflammatory diseases, being on track for a January 2023 launch.

— Alex Harring

Bitcoin and ether were slightly lower on Tuesday as investors refrained from taking any bets ahead of key inflation data due later this week.

Bitcoin was last was last lower by 1% at $19,027.69, according to Coin Metrics. Its volatility has been uncharacteristically low for about a month, while the VIX is climbing to its highest level since the summer.

Ether fell 2% to $1,281.30.

— Tanaya Macheel

The 10-year Treasury yield eased back off its highs in late morning trading, as traders keep a wary eye on the U.K. gilt market.

The yield on the U.S. benchmark hit 4% in overnight trading, as British gilt yields shot higher. The Bank of England in the early morning calmed the market slightly after it announced it was expanding its bond buying plan.

The U.S. 10-year yield fell gradually in U.S. trading to 3.91%.

"This is the first time in years the U.K. is drivng the global bond market. Let's hope it's not off a cliff," said Michael Schumacher of Wells Fargo. Yields move opposite price.

Schumacher said the U.S. yield was simply retracing its earlier move, and was not driven lower by news. But the Treasury market remains glued to gilts, and the focus is on actions of the Bank of England. The central bank said it would add index-linked gilts to its purchases but still plans to end its purchases Oct. 14.

"They've got to get rid of that date. Your first priority if you're a central bank is to stabilize the bond market," he said. "they're going to do the buy program through the 14th and quickly get back to sales. They'll have to get rid of that date quickly."

--Patti Domm

Gig economy stocks fell sharply on Tuesday after the Department of Labor released a proposed rule that could cause the companies to classify drivers employees instead of independent contractors.

Shares of Uber fell more than 12%, while Lyft dropped 13.5%. Doordash fell nearly 10%.

Read more about the proposed rule here.

— Jesse Pound

The S&P 500 and the Nasdaq Composite both fell to multi-year lows on Tuesday as the broader market sold off on growth fears.

The S&P 500 hit the lowest level since November 2020, nearing a two-year low for the index. The tech-heavy Nasdaq Composite slid to a new 52-week low.

Technology and semiconductor companies led the declines. Technology companies are sensitive to rising interest rates, and semiconductors are falling after the Biden Administration limited manufacturing sales to China.

Major technology ETFs notched multi-year lows, with the Technology Select Sector SPDR Fund
hitting its lowest level since November 2020 and the iShares Expanded Tech-Software Sector ETF falling to lows not seen since May 2020.

Top semiconductor ETFs also fell to lowest levels since November 2020.

—Carmen Reinicke, Gina Francolla

Barclays cut Apple's price target 8% to $155, which implies the stock's value will grow 10% over the next year.

The firm called a 3% upside on hardware revenue, showing growth despite headwinds due to international markets getting hit by the surging U.S. dollar. Barclays also noted a strong upside for new MacBooks and smaller one for the new iPhone line.

App store revenue declined for the first time ever, Barclays predicted.

— Alex Harring

All three major indexes fell at the market open on Tuesday as investors weighed upcoming inflation data and earnings reports that will give more information on the state of the U.S. economy.

The Dow Jones Industrial Average fell 66 points, or 0.23%, rebounding from a slump that took the index down about 200 points in premarket trading. The S&P 500 declined 0.48% while the Nasdaq Composite slipped 0.52%.

—Carmen Reinicke

The dividend futures market appears to be pricing in an earnings downturn in 2023, according to Morgan Stanley's Katy Huberty.

"Our US Equity Strategists have been arguing that 2023 earnings estimates need to come down. They find additional support for their view in the dividend futures market, which tends to lead EPS forecasts. Dividend futures have traded materially lower even as forward EPS forecasts have remained sticky on the upside," Huberty wrote in a note on Tuesday .

"They think this is a clear window into the market's view on earnings, as dividends are so closely tied to EPS. They now are leaning more toward their bear case for S&P 500 EPS for next year (i.e., $190)," she added.

Morgan Stanley is far from the only shop on Wall Street that is worried about earnings next year. Many strategists have said that they fear earnings estimates are too high and that the market could continue to fall as expectations come down.

— Jesse Pound, Michael Bloom

Stock futures rebounded ahead of market open Tuesday, erasing losses to trade flat around 8:55 a.m. ET.

Dow Jones Industrial Average futures were down about 25 points, regaining losses from earlier in the session when it was down about 200 points. S&P 500 futures were down about 0.18% and the Nasdaq 100 futures slipped 0.25%.

Bond yields continued to rise, but slowed from their earlier rally. Yields on the 10-year U.S. Treasury were up about four basis points to 3.927%.

—Carmen Reinicke

Economists at Nomura see a recession as likely to start soon in the U.S. and continuing through 2023, with the downturn now expected to be worse than previously forecast.

The firm sees the downturn starting in the recently begun fourth quarter and spanning five consecutive quarters of negative growth, with only a "muted" recovery in 2024, according to a client note issued Tuesday.

With the prolonged recession will come a higher unemployment rate than Nomura originally had expected. The jobless rate now is forecast to peak at 6.4% instead of the previous estimate for 6%.

Real gross domestic product is expected to decline 1.6% in 2023, worse than the previous 1.2% forecast.

In addition to its worse-than-consensus outlook for the recession, Nomura also sees a more aggressive Federal Reserve. The firm expects the Fed to continue hiking rates until its benchmark borrowing rate hits 5.25%-5.5%, before cuts start in September 2023. The fed funds rate is currently targeted in a range between 3%-3.25%.

—Jeff Cox

Shares of American Airlines were moving higher in premarket trading after the company said it expected some of its third-quarter results to beat guidance.

American said that revenue would be up 13% compared to the third quarter of 2019. The company had previously guided to an improvement of 10% to 12%. Total revenue per average seat mile and pre-tax margin are also poised to come in ahead of expectations, according to American.

The stock was up 5.8% before the market open.

— Jesse Pound

Last week during the S&P 500's rally Bank of America clients were net buyers of equities, snapping up $6.1 billion for the fifth consecutive week of inflows, according to a Tuesday note. It was also the third-largest inflow in history since 2008.

"Clients bought both single stocks and ETFs (biggest single stock inflows since April), and bought both large and mid caps while selling small caps for a second week," strategist Jill Carey wrote in the note. In addition, all client groups were net buyers, led by institutional clients.

Corporate client buybacks slowed, but those typically begin to pick up at the start of earnings season. Corporate client buybacks as a percentage of S&P 500 market cap are in line with 2021 levels, but still below 2019 numbers and are tracking below normal seasonal trends in two thirds of weeks year to date.

—Carmen Reinicke

Shares of Meta Platforms dropped more than 1% in premarket trading Tuesday after Interfax reported Russia added the tech company to the list of organizations involved in terrorism and extremism. Separately, Atlantic Equities downgraded Meta Tuesday on concerns of shrinking revenue growth and rising costs.

— Yun Li

Chip stocks were under pressure Tuesday as Covid cases in China spike, raising concern over potential new lockdowns in the country.

Advanced Micro Devices, Nvidia and Micron were all down at least 1% in the premarket. The iShares Semiconductor ETF (SOXX) traded 1.9% lower.

Many schools in the central Chinese city of Xi'an cancelled in-person classes for most students, local news reports said. On top of that, the seven-day moving average of locally transmitted Covid infections more than doubled from 136 on Oct. 1 to 305 on Oct. 9, Nomura data showed.

— Evelyn Cheng, Fred Imbert

Goldman Sachs initiated Warner Music Group with a buy rating, noting the company will outperform peers during a recession.

"We view WMG as one of the highest quality long-term growth compounders in our coverage group," analyst Stephen Laszczyk said. He added that the stock can go up nearly 45% from current levels.

CNBC Pro subscribers can read more here.

— Fred Imbert

European markets retreated on Tuesday as concerns persisted over the global growth outlook and the prospect of more monetary policy tightening from central banks.

The pan-European Stoxx 600 index fell 0.8% in early trade, with basic resources shedding 2% to lead losses as all sectors and major bourses slid into negative territory.

- Elliot Smith

The U.K. employment rate dipped 0.3 percentage points in the period from June to August, but remained robust at 75.5%.

The unemployment rate also fell by 0.3 percentage points to hit 3.5%, the lowest level since 1974, and the number of unemployed people per job vacancy fell to a record low of 0.9. Meanwhile, the number of people who were economically inactive due to long-term sickness was at an all-time high.

The British Chambers of Commerce said labor market tightness was holding back the ability for businesses to service existing customers and grow.

Figures also published Tuesday by the British Retail Consortium showed retail sales were up 2% year-on-year. However, the BRC said this was likely due to inflation as overall sales volumes fell, and noted weakening consumer confidence.

— Jenni Reid

The Bank of England on Tuesday announced an expansion of its emergency bond-buying operation as it looks to restore order to the country's chaotic bond market.

The central bank said it will widen its purchases of U.K. government bonds — known as gilts — to include index-linked gilts from Oct. 11 until Oct. 14. Index-linked gilts are bonds where payouts to bondholders are benchmarked in line with the U.K. retail price index.

"The beginning of this week has seen a further significant repricing of UK government debt, particularly index-linked gilts. Dysfunction in this market, and the prospect of self-reinforcing 'fire sale' dynamics pose a material risk to UK financial stability," the bank said in a statement Tuesday.

Read the full story here.

- Elliot Smith

The yield on the 30-year U.S. Treasury note climbed as high at 3.941%, reaching its highest level in nine years.

The 10-year yield rose to 3.963% and the 2-year yield inched higher to 4.318%. Rates fell earlier this month but started to rise again after positive economic data in the U.S. led investors to increase bets on further rate hikes by the Fed.

Bond yields move inversely to prices and one basis point is equivalent to 0.01%.

— Abigail Ng

Some Wall Street banks have started making the case for buying into tech again, naming specific sectors they are bullish on.

Citi and Morgan Stanley both said they have upgraded tech to overweight.

CNBC Pro subscribers can read more about the areas they are looking at and the global stocks to buy.

— Weizhen Tan

All 11 sectors in the S&P 500 closed more than 10% off their recent highs on Monday.

Communication services is more than 41% lower than its 52-week high. Information technology, consumer discretionary, and real estate are all more than 33% off their recent highs. Financials and materials are down more than 23%, and industrials is more than 20% lower.

— Chris Hayes, Sarah Min

Kevin Simpson said his top stock picks include UPS and Qualcomm as he looks for names with strong dividend growth in a volatile market.

The founder and CIO at Capital Wealth Planning said he has a 5% allocation to UPS, noting its healthy dividend yield of nearly 4%.

"Over the past 10 years, they just continue to raise that dividend, and that's our playbook," Simpson said Monday on CNBC's "Closing Bell: Overtime." "If we can have stocks that turn a profit, they have an EBITDA, they return cash to shareholders, certainly in a time period like this, that type of methodology can work."

Simpson said he's using the decline in semiconductor stocks to build a position in Qualcomm, which has a 2.6% dividend yield. Chip stocks slumped on Monday after the Biden administration announced new measures that would limit U.S. companies' ability to sell advanced computing chips to China.

The investor, who said he has a 14% cash allocation, said he expects "the next three to six months are going to provide ample opportunity to buy amazing names" as the Federal Reserve maintains a hawkish stance against inflation.

— Sarah Min

U.S. stock futures were little changed on Monday night after the Nasdaq Composite closed at its lowest in two years during the regular session.

Dow Jones Industrial Average futures rose by 14 points, or 0.05%. S&P 500 and Nasdaq 100 futures climbed 0.06% and 0.09%, respectively.

— Sarah Min