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What you need to know today
Markets in holding pattern
U.S. stocks struggled to make any meaningful moves Tuesday as Treasury yields rose — the 2-year yield hit a 17-year high. Asia-Pacific markets were mixed in choppy trading Wednesday. Mainland China's Shanghai Composite fell around 0.7% despite the country posting better-than-expected gross domestic product growth and other economic data. Australia's S&P/ASX 200 managed to eke out a 0.3% gain.
China beats expectations
China's economy grew 4.9% year over year and 1.3% on a quarterly basis in the third quarter, according to China's National Bureau of Statistics. The bureau also said retail sales spiked 5.5% and industrial production grew 4.5% in September, compared with a year earlier. All figures surpassed expectations, raising hopes China's economy has found its footing.
Bank earnings
Both Goldman Sachs and Bank of America beat expectations for third-quarter profit and revenue. But in absolute terms, Goldman's profit sank 33% to $2.058 billion and revenue dipped 1% to $11.82 billion, while Bank of America's profit popped 10% from a year ago to $7.8 billion and revenue rose 2.9% to $25.32 billion compared with a year earlier.
World leaders conduct diplomacy efforts
Russian President Vladimir Putin met Chinese President Xi Jinping and gave a speech at Beijing's third Belt and Road forum, inviting other countries to participate in developing the Northern Sea Route between the Pacific and Atlantic oceans. Separately, U.S. President Joe Biden will no longer visit Jordan after a four-way summit was abruptly canceled following the bombing of a Gaza hospital.
[PRO] New ban on Nvidia chips
The U.S. Department of Commerce announced Tuesday new curbs on the sale of chips to China. Nvidia's H800 chip is among the newly banned, causing its shares to fall 4.7% yesterday. Here's how investors should play the stock following the news, according to various analysts.
The bottom line
U.S. markets wavered Tuesday as investors digested September's U.S. retail sales report and third-quarter earnings from banks.
Consumers spent much more last month than economist had expected, which "puts us on track for a strong GDP number later this month," said David Russell of TradeStation, an online trading and brokerage firm. Following the retail report, Goldman Sachs boosted its forecast for third-quarter gross domestic product by 0.3 percentage points to 4%. That'd be the highest quarterly growth since the last quarter of 2021.
It's not just U.S. consumers who are splurging. Retail sales in China also jumped more than expected in September, buoying the country's third-quarter GDP growth. China's economy might finally be stabilizing, giving it a foundation on which to meet — or even exceed — Beijing's target of about 5% economic growth this year. A resurgent China will boost global economic growth, but might raise new fears about inflation on renewed demand from the country.
Indeed, the specter of high inflation and, correspondingly, higher-for-longer interest rates, haunted the retail report, at least for the U.S. The hot spending data "gives the Fed zero reason to loosen policy, which keeps the 10-year Treasury yield pushing toward 5%," said Russell.
Treasury yields jumped yesterday to multiyear highs, pressurizing stocks despite a good start to earnings season. (Of the companies that have reported so far, 83% have surpassed earnings estimates.)
Major U.S. indexes made hesitant moves in both directions. The S&P 500 slipped a miniscule 0.01%, the Nasdaq Composite lost 0.25% while the Dow Jones Industrial Average eked out the merest gain of 0.04%.
If bond yields continue rising, it's possible earnings reports might not have a big effect on the overall stock market. As Chris Zaccarelli, chief investment officer of the Independent Advisor Alliance, put it, "It's more the bond market driving the stock market at this point."
