Stocks retreated on Tuesday as Wall Street awaited the results of this week's Federal Reserve policy meeting.
Disney slid more than 3% after announcing plans to nearly double its investment in its cruise and parks business. Deere, often seen as a barometer of future economic activity, fell nearly 3% in the session after investment bank Evercore ISI downgraded the stock due to agricultural production concerns.
The central bank's two-day meeting begins on Tuesday. The Fed is not expected to raise rates when announcing its decision Wednesday, with traders pricing in a 99% probability that the central bank skips a hike, according to CME Group's FedWatch tool, a gauge of pricing in fed funds futures. Traders are pricing just a 29% chance of a hike in November.
The Fed will also offer economic forecasts on Wednesday. Investors will watch for commentary around the path of inflation and future of monetary policy.
"Now … that we're face to face with the Fed meeting, markets are just taking a little breather and waiting to see what they say to take their next cue," said Chris Fasciano, portfolio manager at Commonwealth Financial Network.
"We know that we're closer to the end of the hiking cycle than the beginning," said Kevin Gordon, senior investment strategist at Charles Schwab. "How they're viewing the next year out, or at least turning the corner in 2024, is much more important."
West Texas Intermediate and Brent crude prices settled lower after hitting highs not seen since November. The move seemed to buoy market sentiment and lift stocks off their lows. Elsewhere, the 10-year U.S. Treasury yield hit a high not seen since November 2007.
Leadership of the striking United Auto Workers union said more members could be called on to withhold labor if progress is not made by a Friday deadline. Stellantis advanced more than 2% in the session, while Ford and General Motors each added more than 1%.
Stocks finish lower
Redburn Atlantic initiates Arm with a hold rating
Redburn Atlantic initiated coverage of Arm with a hold rating, citing a tricky execution path ahead.
"Arm's guidance for a rapid pivot in achieved royalty rates would be a marked departure from historical performance trends," wrote analyst Timm Schulze-Melander in a Tuesday note to clients.
"Given lackluster financial performance in FY23 and the June quarter, F2Q earnings in mid-November need to evidence how such a pivot will be both delivered and sustained," he added.
The next four to six quarter will be critical for Arm and should influence the company's growth and earnings power over the long run, according to Schulze-Melander.
"The stakes are high and the path ahead challenging," he wrote, placing a $50 price target on shares that represents about 14% downside from Monday's close.
Shares sit about 1% below last week's debut price Thursday and 13% below that session's closing level.
— Samantha Subin
Shares of U.S. Bancorp stand to gain more than 90%, Oppenheimer says
Oppenheimer is optimistic that U.S. Bancorp could bounce back after its tough year.
The firm maintained its overweight rating and $67 price target on the stock, implying that shares stand to gain 92.8% from its close on Monday. The stock has plunged more than 21% so far this year, but has seen a modest increase this quarter.
"COVID-19 disruptions and declining rate headwinds have obstructed the quarterly progression of operating leverage and caused a likely minor lapse; however, we think USB is well poised to continue to outperform and will likely return to its prior trends once trends normalize," analyst Chris Kotowski wrote in a Tuesday note.
While he said that USB has long been one of the best-performing banks in the industry, it has consistently lagged its major rivals in earnings-per-share growth. The bank has started seeing accelerating core earnings growth again since interest rates started rising in 2015, he added.
— Pia Singh
CNBC Pro: Never before have just 10 stocks held this much sway over the global stock market
The top 10 global stocks by market value have a greater hold than ever before on the capital markets, and that could be a bad thing, says Ned Davis Research.
The Wall Street firm said the top 10 names by market cap in the All Country World Index (ACWI) now account for nearly one-fifth, or 19%, of the value of the benchmark — a new record in terms of concentration, according to a Monday note.
Not only are all U.S. companies, the top eight — Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla — are the usual suspects that have enjoyed huge rallies this year on artificial intelligence enthusiasm.
But if history is any indication, that could mean choppy waters ahead for investors.
CNBC Pro subscribers can read the full story here.
— Sarah Min
Pinterest shares rise on strong growth outlook
The company said during its first investor day that it anticipates its compound annual growth rate to range in the mid to high teens over the next three to five years. That's above Pinterest's guidance for high-single digit revenue growth in the third quarter.
— Jordan Novet, Samantha Subin
Stocks head for losing session
The three major indexes regained some ground but were still on pace to end Tuesday lower with one hour of trading left.
All three were off session lows. The Dow has lost more than 300 points, or 0.9%, at its worst point in the session. The S&P 500 and Nasdaq has tumbled about 0.8% and 1%, respectively.
— Alex Harring
Daiwa Capital Markets upgrades Dell
Dell stock will continue to benefit from strong artificial intelligence demand and server backlog, according to Daiwa Capital Markets.
The firm upgraded shares of the computer company to outperform in a Monday note.
"It is very encouraging that Dell is seeing material demand now for their AI solutions, specifically their PowerEdge 9680," analyst Louis Miscioscia said. "The backlog is $2 [billion], with a 39 week lead time to May 2024 and with a sales pipeline that is even bigger than the backlog."
Shares added 1.3% in Tuesday trading.
CNBC Pro subscribers can read the full story here.
— Brian Evans
Royal Caribbean can rally more than 40%, says Truist
Royal Caribbean was upgraded to buy from hold, while Carnival was bumped up to hold from sell by Truist on Tuesday. The Wall Street firm also hiked its price target on Royal Caribbean to $137 from $115, suggesting nearly 43% upside from Monday's close.
After conversations with travel agency executives and examining big data on future bookings and pricing, forward-looking trends look "exceptionally strong" for 2024 and 2025, analyst Patrick Scholes wrote in a note to clients. On top of that, the stocks have cooled off after several months of outperformance, he said. Shares of Royal Caribbean are down about 12.5% from its 2023 closing high of $109.68 on July 27.
"Assuming no major 'unforeseen events' (this industry unfortunately has been susceptible to such things), we believe consensus earnings expectations for 2024 and 2025 are too conservative, especially for RCL," Scholes said.
Royal Caribbean added more than 2%, while Carnival gained around 0.9%.
— Michelle Fox
Deere falls over 2% upon Evercore downgrade
Evercore downgraded shares of Deere to in-line from outperform on Monday, citing slowing production and declining revenues in the next fiscal year. Shares of Deere fell over 2% during Monday's trading session.
Analyst David Raso reduced the price target for Deere accordingly to $424 from $456. With the stock opening this morning at $402.59, that still implies an upside of over 5%.
However, Raso noted that Deere's near-term revenues still look better than those of competitors such as CNH Industrial and AGCO.
"Keeping DE's overall '24 sales declines likely less than, say, CNHI or AGCO is DE's superior mix of high hp tractors, particularly for North America and its greater exposure to North America construction equipment," Raso wrote.
— Lisa Kailai Han, Michael Bloom
Lazard falls after Goldman downgrade
The IPOs of Arm Holdings and Instacart have raised hopes of a revenue rebound for Wall Street banks, but investors should stay away from Lazard, according to Goldman Sachs.
Analyst James Yaro downgraded the financial stock to sell from neutral, saying in a note to clients that Lazard would struggle to keep up with its peers.
"We see slower top-line growth than at peers, driven by a combination of slower senior banker hiring ..., the overhang from structurally lower growth in asset management that comprises ~40% of LAZ's revenue, and less skew to areas of M&A that we expect to outperform," the note said.
Shares of Lazard were down 1.3% on Tuesday.
— Jesse Pound
Stocks making the biggest moves midday
These are some of the stocks making the biggest midday moves:
- Starbucks — Shares fell 2% in midday trading after a downgrade to market perform from TD Cowen.
- Instacart — The grocery delivery stock roared out the gates and rallied 35% as it debuted on the public market midday Tuesday.
- Deere — The industrial stock fell nearly 3% after Evercore downgraded the shares to in line from outperform.
— Pia SIngh
All S&P 500 sectors trade down
All 11 sectors in the S&P 500 traded down on Tuesday.
The broad index slipped around 0.7% shortly after 1 p.m. ET. Consumer discretionary, energy and industrial stocks were among the worst performing, with the three sectors all down more than 1%.
Utilities and health care were able to keep losses mitigated, down just 0.3% each.
— Alex Harring