Stocks Finish Higher on Lower Bond Yields and Earnings Optimism

The S&P 500 Index ($SPX) (SPY) closed up by +0.58% on Tuesday, the Dow Jones Industrial Average ($DOWI) (DIA) closed up by +0.49%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.48%.  December E-mini S&P futures (ESZ26) rose +0.61%, and December E-mini Nasdaq futures (NQZ26) rose +0.52%.

Stock indexes settled higher on Tuesday, with the S&P 500 and Nasdaq 100 posting new all-time highs and the Dow Jones Industrials posting a 1-week high.  Lower bond yields on Tuesday supported stock gains as the 10-year T-note yield fell -4 bp to 5.27%.

Strength in the Magnificent Seven technology stocks and a rally in cybersecurity stocks also supported the overall market on Tuesday.  In addition, earnings optimism is bullish for stock prices.  According to data compiled by Bloomberg Intelligence, Q3 S&P 500 profits are expected to climb by +25% from a year earlier, up from a July estimate of 22%. Q3 earnings season begins next week when US money center banks report. 

Weakness in chipmakers and AI stocks on Tuesday limited broader market gains.  Also, hawkish comments on Tuesday from San Francisco Fed President Mary Daly weighed on stocks when she said she's concerned that AI spending, tariffs, and energy costs could keep inflation elevated longer, requiring more Fed tightening.

Tuesday’s US economic news was bearish for stocks after the Aug trade deficit increased to a 17-month high of -$105.6 billion, wider than expectations of -$102.1 billion and a negative factor for Q3 GDP.

Nov WTI crude oil prices (CLX26) settled little changed on Tuesday.  Prices initially tumbled to a 1-month low Tuesday, on signs that more oil supplies are coming out of the Middle East.  Kuwait said it is pumping about 75% of the level seen before the Iran war, and Iraq is seeking to hire additional vessels to send its oil cargoes through the Strait of Hormuz.  Crude prices were also pressured on Tuesday after Yemeni government forces backed by Saudi Arabia said they retook the port city of Mokha and other areas near the Bab el-Mandeb Strait from Houthi militants. 

However, short covering emerged, and crude prices finished little changed Tuesday on signs that Iran is ramping up attacks on tankers attempting to transit the Strait of Hormuz.  The UK’s Maritime Trade Operations reported on Tuesday that the pace of attacks by Iran has increased in recent days, with nine vessels targeted over the last several days. 

Markets are discounting a 19% chance of a +25 bp Fed rate hike at the next FOMC meeting on October 27-28.

Overseas stock markets settled higher on Tuesday.  The Euro Stoxx 50 closed up +0.48%.  China's Shanghai Composite did not trade, with markets in China closed for the week-long Golden Week holidays.  Japan's Nikkei-225 Stock Average soared to a 3-month high and closed up +1.05%.

Interest Rates

December 10-year T-notes (ZNZ6) closed up +9 ticks on Tuesday.  The 10-year T-note yield fell down -3.8 bp to 5.267%.  T-notes finished higher on Tuesday and found early support from the decline in WTI crude oil prices to a 1-month low.  Also, decent demand for the Treasury’s $58 billion auction of 3-year T-notes was supportive for prices after the auction produced a bid-to-cover ratio of 2.62, close to the 10-auction average of 2.64.

However, Tuesday’s rally in the S&P 500 curbed safe haven demand for T-notes.  Also, hawkish comments from San Francisco Fed President Mary Daly limited gains in T-notes when she said inflation may last longer than expected, requiring additional Fed rate hikes.

European government bond yields moved lower on Tuesday.  The 10-year German bund yield fell -1.5 bp to 3.478%.  The 10-year UK gilt yield fell -4.3 bp to 5.375%.

Eurozone Aug retail sales rose +0.1% m/m, weaker than expectations of +0.2% m/m.

German Aug factory orders fell -10.6% m/m, weaker than expectations of -1.0% m/m and the biggest decline in 7 months.

French Finance Minister Lescure said circumstances in France are very different from a decade earlier during the debt crisis and the country is far from needing help from the ECB.

Markets are discounting a 14% chance of a +25 bp ECB rate hike at the ECB’s next meeting on October 29.

US Stock Movers

Most Magnificent Seven technology stocks finished higher on Tuesday, a positive factor for the overall market.  Amazon.com (AMZN) closed up more than +1%, and Microsoft (MSFT) closed up +0.85%.  Also, Tesla (TSLA) closed up +0.47%, Alphabet (GOOGL) closed up +0.34%, Apple (AAPL) closed up +0.22%, and Nvidia (NVDA) closed up +0.15%.   Conversely, Meta Platforms (META) closed down -0.34%. 

Strength in cybersecurity stocks rallied on Tuesday. Zscaler (ZS) closed up more than +5%, and Palo Alto Networks (PANW) and Fortinet (FTNT) closed up more than +3%.  Also, Crowdstrike Holdings (CRWD) and Gen Digital (GEN) closed up more than +2%, and SentinelOne (S) closed up more than +1%.

Airlines and cruise line operators found support on Tuesday from the decline in WTI crude oil to a 1-month low, which lowers fuel costs and boosts the profitability prospects of the companies.  Royal Caribbean Cruises (RCL) closed up more than +5% and Norwegian Cruise Line Holdings (NCLH) closed up more than +4%.  Also, Carnival (CCL) closed up more than +3%, and United Airlines Holdings (UAL), American Airlines Group (AAL), Alaska Air Group (ALK) and Southwest Airlines (LUV) closed up more than +1%.

Weakness in chipmakers and AI stocks on Tuesday limited gains in the broader market.  Seagate Technology Holdings Plc (STX) closed down more than -9% to lead losers in the S&P 500 and the Nasdaq 100.  Also, Western Digital (WDC) closed down more than -6% and KLA Corp (KLAC) closed down more than -4%. In addition, Lam Research (LRCX) and Intel (INTC) closed down more than -3%, and Sandisk (SNDK) and Applied Materials (AMAT) closed down more than -2%.

Option Care Health (OPCH) closed up more than +32% after McKesson and Clayton Dubilier & Rice agreed to acquire the company for $5.8 billion, including debt.

Constellation Energy (CEG) closed up more than +12% to lead gainers in the Nasdaq 100 after announcing a long-term deal with Google to bring 890 MW of new nuclear capacity over 20 years onto the PJM grid in Illinois, Pennsylvania, and New Jersey.

Apogee Enterprises (APOG) closed up more than +11% after boosting its 2027 adjusted EPS estimate to $3.00 to $3.40 from a prior view of $2.70 to $3.25, well above the consensus of $2.92.

Lam Weston Holdings (LW) closed up more than +7% after boosting its 2027 adjusted EPS forecast to $3.05 to $3.35 from a previous estimate of $2.95 to $3.25, stronger than the consensus of $3.02.

Marvell Technology (MRVL) closed up more than +5% after saying at an investor day conference that it sees $20 billion in total revenue for fiscal 2028. 

Advanced Micro Devices (AMD) closed up more than +2% after CEO Lisa Su predicted “very high” chip demand continuing for the next few years.

Vaxcyte (PCVX) closed down more than -9% after announcing that it will offer $500 million worth of shares and pre-funded warrants.

Gentex (GNTX) closed down more than -1% after Goldman Sachs downgraded the stock to sell from neutral with a price target of $20.

Earnings Reports (10/7/2026)

Applied Digital Corp (APLD), Richardson Electronics Ltd/Uni (RELL), ZenaTech Inc (ZENA).

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.