Stocks rose for a second straight session on Tuesday as strong corporate earnings reports helped extend a rally to start the week.
The Dow Jones Industrial Average gained 337.98 points, or 1.12%, to close at 30,523.80. The S&P 500 climbed 1.14% to 3,719.98. The Nasdaq Composite added 0.90%, finishing at 10,772.40. Those gains built on a bigger upside move from Monday, which saw the Nasdaq rise more than 3% for its best day since July.
Goldman Sachs rose 2.3% to boost the Dow after strong trading results helped the investment bank beat quarterly earnings and revenue expectations. That report continued a strong stretch of bank earnings, including beats from Bank of America and Bank of New York Mellon on Monday, and the financial sector as a whole outperformed on Tuesday.
Lockheed Martin also rose 8.7% after its earnings per share topped estimates.
Fears of a recession and overly aggressive central banks have helped push the U.S. markets to their lows of the year in recent weeks, but the solid start to earnings season may signal that the economy is currently in better shape than feared.
"3Q and 4Q earnings should confirm fundamentals remain anchored in resilient labor market and Covid reopening. Equity valuation will likely remain tied to global central bank rhetoric and rates, which is turning incrementally less negative. As such, we see equities primed for upside into year-end on resilient 2H22 earnings, low equity positioning, very negative sentiment and given more reasonable valuation," Dubravko Lakos-Bujas, JPMorgan's head of global macro research, said in a note to clients.
"Next year, however, we expect a more challenging earnings backdrop relative to current expectations," he added.
Trading was choppy on Tuesday, as many investors seem to lack confidence in the rally. The averages hit their highest level in early trading, with the Dow gaining more than 600 points, but lost ground as U.S. Treasury yields moved up. The Nasdaq briefly turned negative at two different points during the session.
Elsewhere, Salesforce rose 4.3% after activist Starboard Value LP revealed a stake in the software giant, making the stock the top performer in the Dow.
The major averages closed near the middle of their trading range for the day, with the Dow up more than 300 points. The Nasdaq closed up nearly 1% after fading twice during the day.
— Jesse Pound
The Dow is on track to gain roughly 1,000 points for the first two days of this week, but many investment professionals are skeptical that this rally has staying power.
Alli McCartney, UBS Private Wealth Management, said on "Closing Bell" that it is not time yet for investors to jump back in to the market.
"Great that we have some buyers stepping in. I think getting some flow and some sustainability, or at least some support, in this market is really important and we will take it. But we do not think we are out of the woods yet," McCartney said.
— Jesse Pound
Shares of Apple declined and briefly turned negative after a report from The Information that the tech giant was cutting production of its new iPhone 14 Plus.
The move by Apple, the biggest U.S. stock, brought the major averages back near their lows of the day, though they have since recovered some of that ground.
—Jesse Pound
The Fed is widely expected to hike by another three-quarters of a percentage point next month, but the central bank may be reaching its limit for dictating long-term interest rates, according to The Leuthold Group's Jim Paulsen.
"There is considerable precedent in past tightening cycles for the Fed to be shut down by the bond market "blinking" first. The Fed may soon attempt to raise the funds rate to 4%, 4.5%, or even 5%. But at some point, longer-term bonds may simply stop rising and refuse to follow the Fed's lead," Paulsen wrote in a note to clients on Tuesday.
The 10-year Treasury yield has traded above 4% in recent days, reaching its highest levels in more than a decade. With growing concern about a recession in 2023, it may be close to a ceiling, Paulsen said.
"Each time the Fed further tightens monetary policy, recession fears are elevated relative to inflation fears. Ultimately, as the Fed becomes more and more aggressive, recession becomes a bigger worry than inflation, and bond buyers begin outnumbering bond sellers—that is, the bond market blinks," Paulsen added.
— Jesse Pound
Fears about a potential recession are growing, with Goldman Sachs CEO David Solomon being the latest high profile figure to warn about the possibility. That has investors are looking for sectors that may have historically proven to be resilient during a downturn.
It turns out, alcohol consumption has remained steady during recessions, a Goldman Sachs analysis found. However, a separate report from Bernstein found that during times of abnormally high unemployment per capita consumption fell 1%.
Whether there is no drop in consumption, or just a slight one, there are some nuances that may have an impact on some companies' bottom lines. That includes any shift in the current trend of consumers trading up to higher-end cocktails and beer. Instead, they may downgrade to lower priced options, shifting within the spirits category or switching from spirits to beer.
To find out more about the current trends in place, how they may be impacted by a recession and what names top analysts' buy lists, read the CNBC Pro story here.
— Michelle Fox
A number of important stock market indicators are at key levels right now, according to Randy Frederick, managing director of trading and derivatives at Charles Schwab.
The S&P 500, the Dow Jones Industrial Average and the Dow Jones Transportation average are trading at their 200-week moving average. In addition, the yield on the 10-year U.S. Treasury has hit 4%, another important level.
"Throw in the kickoff to Q3 earnings season and it seems that the only logical outlook for this week is 'Breakout,'" Frederick said.
Holding at these levels could be a good sign going forward.
"If the SPX can stay above its 200-week SMA and 10-year yields remain below 4.0%, this will likely boost bullish sentiment, but the inverse is true as well," he said.
—Carmen Reinicke
It's not a question of whether or not to buy, it's about what area you should focus on, says Josh Brown
Investors in this market should not necessarily be thinking about whether it is a good time to buy, said Ritholtz Wealth Management co-founder and CEO Josh Brown.
"We are not really in a 'yes or no, do I buy?' It is, 'What are the areas I should be focused on, even if it is not the overall bottom for the S&P 500,'" he said on CNBC's "Halftime Report."
Brown believes investors should pay less attention to valuation and think more about price and sentiment.
"There are large areas of the market that did not violate the June lows into the overall market September lows," Brown said.
They may not have the most trading gains off the low, but the fact that they aren't selling off with the rest of the market may indicate those invested in the spaces are either ignoring the overall market picture or trying to get ahead of it, he said.
That includes health care, some select financials, and energy.
Elsewhere in the market, Brown is not bullish on Netflix into its earnings report after the close, since it typically doesn't rally afterwards, he said. He owns the stock and thinks a lot of bad news is already baked into the name. Right now, he is considering adding shares of Domino's Pizza as a potential hedge. He thinks it is "way too cheap, fundamentally."
— Michelle Fox
The market appears to be bumping along a bottom and could soon make a big rally, according to Janney technical strategist Dan Wantrobski.
"Our work continues to point toward progress being made on the bottoming front for this correction cycle. We believe price and sentiment components are very close, while the time component implies there is likely to be more volatility experienced at some point in 2023," Wantrobski said in a note to clients on Tuesday.
While many on Wall Street are skeptical of this rally, Wantrobski says the upside in the coming weeks could be substantial.
"These recent buying surges (last week & yesterday) combined with oversold conditions and deep bearish sentiment still imply that the markets are coiled for more upside ahead. We believe the benchmark S&P 500 can quite easily slingshot back toward the 3800-4000 range in short order, with the potential to test toward the 4200+ zone by year-end," Wantrobski said.
— Jesse Pound, Michael Bloom
— Tanaya Macheel
Art Cashin, the UBS director of floor operations, said Tuesday that short-covering during last Thursday's big intraday swing may have set the stage for a solid multi-week rally. Cashin said that this could prove to be an "intermediate-term bottom" for the market.
"I think this is a bounce in a bear market, but it could last a couple of weeks," Cashin said on "Squawk on the Street." He said that he was originally expecting this trading action to take place later in the month.
However, Cashin did point out that the market had a strong start in the first week of October, only to give back most of those gains in the following days.
"It's important that we hold on. We shouldn't let this rally fade in the next two days. I think if we can stay for a couple of more days, we may be seeing not the turning point, but an important point," he said.
The major averages are still on track to post a second positive day, but it has been wobbly since Cashin's remarks. In fact, the Nasdaq Composite briefly turned negative in midday trading.
— Jesse Pound
The market has seen an unusually high number of "all or nothing days" in recent weeks, according to Bespoke Investment Group.
The firm said in a note on Tuesday that the number of days where the S&P 500 saw at least 400 stocks either rise or fall is nearing record levels on a five-week trailing basis.
"Given that you can count the number of prior periods when the rolling five-week total exceeded ten on one hand, this is not a situation you see very often. Through yesterday's close, the rolling total reached 12, which is just three shy of the record high of 15 seen on 3/26/20 just three days after the Covid crash low," the note said.
Tuesday is on track to add to that trend. In midday trading, there were 430 S&P 500 stocks positive for the session, according to FactSet.
— Jesse Pound
Shares of Microsoft and semiconductor names gave back their earlier gains Tuesday, knocking the major averages off their session highs.
Microsoft was last down 0.2% after rising as much as 2.7%. Intel, AMD and Nvidia were also lower after trading higher to start the day.
— Fred Imbert
Enviva's shares were up 4.1% during day trading after Raymond James called the company's alternative to coal misunderstood.
The firm said Enviva's wood pellets are a more socially and environmentally responsible way to make energy. It also said the stock has an upside of more than 50%.
CNBC Pro subscribers can read the full story here.
— Alex Harring
The market averages continued to give up ground as Treasury yields push higher.
The 10-year Treasury yield climbed to 4.054% after trading as low as 3.961% earlier in the day. The 2-year Treasury yield also reversed its early losses and is now little changed on the day at 4.454%.
— Jesse Pound
The stock market has given back some of its initial gains, and the three major averages are now up about 1.5% each.
Moderna is the biggest loser in the Nasdaq 100, falling more than 2%. Intel is the worst performer in the Dow, sliding about 1.5%.
— Jesse Pound
Deutsche Bank is still a believer in Microsoft ahead of the tech giant's earnings.
In a note Tuesday, analyst Brian Zelnick said he doesn't anticipate any big surprises when Microsoft reports next Tuesday. The commercial and enterprise segments haven't gotten materially worse and continue to hold up, and the weakening consumer backdrop is well understood by investors, he wrote.
"We continue to rest our Buy rating on the high-quality nature of Microsoft's business, supported by multiple secular tailwinds, and a belief that in a weakening IT spending environment it is likely to outperform peers that don't benefit from similar wallet share consolidation opportunities within a vast and entrenched installed base," Zelnick said.
He's lowered his fiscal year 23 earnings-per-share to $9.83 from $10.05. His $315 price target implies nearly 33% upside from Monday's close.
— Michelle Fox
The Treasury market could be giving a boost to stocks on Tuesday, as the 10-year U.S. Treasury yield has fallen back below the 4% level.
Yields are lower across most of the the curve, with the 2-year yield falling four basis points to 4.416%.
Price moves opposite of yields, and one basis point equals 0.01 percentage points.
— Jesse Pound
Home builder sentiment dropped in October, hitting 38 on the National Association of Homebuilder's housing market index.
The new reading is down from 46 hit in September and is the lowest level the index has hit since August 2012.
The reading is a signal of negative sentiment as it is below 50 on the index. In addition, the index has fallen to half of what it was six months ago as the homebuilding industry has dealt with the rapid rise in interest rates. That's pushed up mortgage prices, making buyers less likely to purchase homes.
This is the first year since 2011 that housing starts will fall.
—Carmen Reinicke
Dan Loeb's Third Point has a stake in Colgate-Palmolive, CNBC's David Faber reported.
Loeb pointed to Hill's Pet Nutrition, a pet food company under Colgate, as potentially having value if spun off.
The move comes as pet ownership around the world rises, with owners willing to spend for what they see as better-quality food. Hill's is part of the fastest growing unit within Colgate and has been pitched as backed by "science," catering to the more health-conscious pet owner.
The stock was trading up nearly 3% Tuesday.
— Alex Harring, Yun Li
Stocks opened sharply higher, with the S&P 500 and Nasdaq rising more than 2% each and the Dow adding 600 points. The Dow has now gained more than 1,000 points this week.
— Jesse Pound