Stocks finished mixed Tuesday as the market pared gains from the previous day's session.
The Dow Jones Industrial Average ended down 157 points, or 0.42%, while the S&P 500 lost 0.15% and the Nasdaq edged up 0.09%.
Shares of Juniper Networks (JNPR) -) soared nearly 22% following a report in The Wall Street Journal said Hewlett Packard Enterprise (HPE) -) could announce a deal to acquire the networking hardware company for about $13 billion as soon as this week.
In economic news, the National Federation of Independent Business’s Small Business Optimism Index, a key benchmark for the largest section of U.S corporate activity, jumped firmly higher in December and topped its 2023 average.
Bill Adams, Chief Economist for Comerica Bank, said the survey reported a notable decrease in small businesses struggling with labor quality issues, another sign that labor shortages are abating.
"The big question about this year’s economic outlook is, how will the famously long-and-variable lags of monetary policy affect Main Street business?" he said. "Some business borrowers locked in low fixed rates on financing before 2022 and are going to see their borrowing costs increase in 2024 as rates reset to current higher levels. That will slow the economy."
On the other hand, Adams said some businesses put off borrowing and investing decisions since inflation surged in 2022 because interest rates were high, and high inflation made them concerned rates would continue to rise.
"Those businesses are more likely to pull the trigger now that inflation is slowing and interest rates are falling," he said.
Updated at 1:49 PM EST
Solid sale
The Treasury's $52 billion sale of new 3-year notes went well, kicking-off a series of three coupon bond auctions this week that will test the market's appetite for fixed income product ahead of Thursday's inflation report.
The Treasury drew a bid-to-cover ratio of 2.67 for the sale, well ahead of the 2.42 rate recorded in early December, with foreign investors taking more than 65.3% of the bonds on offer, up from just 52.1% last month.
Stocks are still in the red, but paring losses into the afternoon session, with the S&P 500 down 6 points, or 0.15%, the Dow down 198 points and the Nasdaq little-changed from last night's close.
Updated at 11:06 AM EST
Auction on deck
Treasury yields are edging just a tad lower ahead of today's $52 billion auction of 3-year notes, which is expected to conclude at around 1:00 pm Eastern.
Benchmark 10-year note yields were last seen trading at around 4.017%, down 2 basis points on the session but around 4 basis points higher from Monday's closing levels. Two-year notes, meanwhile, were last seen little-changed at 4.379%.
In stocks, the S&P 500 was last seen 19 points lower, or 0.41%, while the Dow was down 260 points. The Nasdaq slipped 53 points, or 0.36%.
Updated at 9:56 AM EST
Early pullback
Stocks are giving back around a third of yesterday's gains in early trading, with the S&P 500 marked 28.7 points, or 0.36% lower in the opening hour, with the Dow also down around 277 points thanks in part to another lurch lower for Boeing BA.
The Nasdaq, meanwhile, slipped 105 points, or 0.7%, following yesterday's 2.1% decline.
Updated at 8:23 AM EST
Business could be booming
The National Federation of Independent Business’s Small Business Optimism Index, a key benchmark for the largest section of U.S corporate activity, jumped firmly higher in December and topped its 2023 average, according to data published Tuesday.
That could pare calls for a near-term recession, although much will depend on the impact of Fed rate hikes, which are yet to impact the borrowing costs of smaller businesses that typically lock-in funding over longer periods of time.
"With long-term interest rates and gas prices falling, the Fed expected to ease monetary policy, employment rising, and small businesses spending on capital investments, the economy is in decent shape at the start of 2024," said Bill Adams, chief economist for Comerica Bank in Dallas.
Stock Market Today
Stocks ended their best session since November to start the week, with powerful gains for the so-called 'Magnificent 7' mega-cap tech names driving the Nasdaq to a 2.1% gain while a pullback in Treasury bond yields helped lift the S&P 500.
The New York Fed's closely tracked survey of inflation expectations showed consumers are forecasting their softest year-ahead projections for price increases in three years, paired with a slump in global crude oil that has domestic gasoline prices testing $3 per gallon over the coming week.
That's keeping bets on a series of Fed rate cuts alive heading into Thursday's December inflation report, as is commentary from Fed officials suggesting that policy is sufficiently restrictive to bring consumer-price pressures back to the central bank's 2% target.
"My view has evolved to consider the possibility that the rate of inflation could decline further with the policy rate held at the current level for some time," Fed Governor Michelle Bowman told a banking event in South Carolina last night.
"Should inflation continue to fall closer to our 2% goal over time, it will eventually become appropriate to begin the process of lowering our policy rate to prevent policy from becoming overly restrictive," she added.
Traders put the chances of a March rate cut at around 57.3%, according to CME Group's FedWatch, with the odds of a follow-on move in May pegged at around 47.9%.
Benchmark 10-year Treasury note yields were marked modestly higher heading into the start of the trading session at 4.049% as traders are eyeing the first coupon bond auctions of the year later today with a $52 billion sale of new 3-year notes.
Benchmark 2-year notes are trading at 4.383% while the U.S. dollar index, which tracks the greenback against a basket of its global peers, was marked 0.15% higher at 102.362.
JPMorgan (JPM) -) will lead a parade of big-bank earnings Friday to kick off the start of the fourth-quarter-earnings season. Analysts are looking for collective S&P 500 profits to rise 5.2% from a year earlier to a share-weighted $457.2 billion.
On Wall Street, stocks are set for a softer open, with futures contracts tied to the S&P 500 indicating a 23 point opening-bell decline, following on from last night's 66 point advance.
Futures tied to the Dow Jones Industrial Average are suggesting a 175 point decline while those linked to the Nasdaq suggest a 107 point dip at the start of trading.
In overseas markets, Europe's Stoxx 600 was marked 0.17% lower in early Frankfurt trading, matching the 0.13% decline for the regionwide MSCI ex-Japan benchmark in Asia.
Japan's Nikkei 225, meanwhile, returned to its Old Age Day holiday to rise 1.16% on the session, lifting the index to a fresh 33-year intraday high of 33,990.28 points.
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