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Limited seats available, first come first served. Let us journey together toward sustainability! [Click to register] US stocks closed lower on Tuesday as traders digested earnings reports from several major banks and the pressure that a sharp overnight decline in South Korean stocks placed on memory chip shares.
The S&P 500 edged slightly lower, while the Nasdaq Composite fell 0.15%. The Dow Jones Industrial Average dropped 179 points, or 0.35%, giving back earlier gains after rising more than 460 points at one point during the session.
JPMorgan Chase reported third-quarter earnings and revenue that both fell short of analyst expectations, but the bank raised its 2026 net interest income guidance. Its stock was roughly flat in recent trading. Wells Fargo fell 2% on mixed third-quarter results, while Goldman Sachs edged higher after third-quarter revenue beat expectations.
"The results these banks are posting are still strong, it's just that expectations are very high, and in this earnings season, higher expectations are a risk for all kinds of companies," said Rebecca Walser, chief investment officer at Walser Wealth Management. Meanwhile, UnitedHealth rose slightly after its results beat analyst expectations. These early earnings reports could set the tone for what is expected to be a high-bar earnings season. According to FactSet data, analysts on average expect S&P 500 profits to grow nearly 30% from a year earlier.
Memory chip stocks came under pressure after South Korea's Kospi benchmark index fell 5.5%, closing at its lowest level since July 31, amid valuation concerns for the sector and intensifying competition. SK Hynix dropped nearly 4%. Seagate Technology and Western Digital each fell 2%. Micron Technology and SanDisk declined nearly 5% and more than 2%, respectively.
What's driving the market this week
This round of early earnings reports may set the tone for the current earnings season, with the market holding high expectations. Data from market data firm FactSet shows that analysts on average expect S&P 500 constituent companies' profits to grow close to 30% year over year. Anthony Salimben, chief market strategist at Legg Mason, wrote: "Three types of factors may determine how investors view this earnings season: 1) banks (reflecting the health of consumers and businesses); 2) large-cap tech stocks (progress in AI commercialization); 3) the energy sector (whether oil-driven profits can persist). Beyond that, against the backdrop of high interest rates, elevated costs, and an uncertain macroeconomic outlook, all industries across the market will be closely watching the operating health of consumers and businesses."
On Tuesday, investors will also parse US existing home sales data while keeping an eye on public remarks from Federal Reserve officials Tom Barkin and Susan Collins. Later this week, US September inflation data is due. Treasury yields have recently touched multi-decade highs, and this inflation reading could trigger significant swings in Treasury yields. US bond markets were closed Monday for Indigenous Peoples' Day. US stocks closed mixed on Monday. The Dow Jones Industrial Average closed up more than 195 points, but declines in the memory chip sector dragged the Nasdaq Composite and the S&P 500 lower.
European stocks were broadly higher on Tuesday, with the pan-European Stoxx 600 up 0.7% in early trading; the UK's FTSE 100 led major European indexes with a gain of 0.8%.
Bond yields stabilize
Global bond markets rallied broadly. French government bonds were particularly notable, with the spread between the French 10-year yield and the German equivalent narrowing by about 4 basis points to below 140 basis points. The US benchmark 10-year Treasury yield fell to 5.193%, moving further away from last week's high of 5.364%. Earlier, that yield had risen to its highest level in 24 years. Over the past few weeks, inflation pressures from elevated energy prices, combined with market concerns about swelling government debt, have triggered multiple rounds of bond market selloffs, pushing borrowing costs in several economies around the world to multi-decade highs. Charu Chanana, chief investment strategist at Saxo Bank, said that after the recent sharp rise in US Treasury yields, investors are buying US government bonds again, but she views this more as a "tactical rebound." She said: "Sticky inflation, high oil prices, and large-scale government borrowing remain the main obstacles to a sustained recovery in the bond market."
Focus on US CPI
Traders are awaiting US inflation data due Wednesday for clues about the Federal Reserve's future monetary policy path. According to the CME FedWatch tool, the market currently expects an 80.6% probability that the Fed will keep rates unchanged at its meeting later this month, up from 51% a month ago. In oil markets, Brent crude ended a three-session winning streak as traders weighed energy supply risks from an attack on Saudi Arabia against the prospect of increased Russian diesel supply, pushing international oil prices lower. Brent crude futures fell 1.7% to $104.78 a barrel, slightly below the two-week high touched in the previous session. As US Treasury yields and oil prices both retreated, the dollar posted its first decline in a week.
Goldman Sachs, Morgan Stanley and other Wall Street banks bullish on a Treasury rebound
After weeks of selling pushed US Treasury yields to multi-year highs, Wall Street strategists are beginning to reassess the investment value of US government bonds. Institutions including Goldman Sachs, Morgan Stanley, and Citigroup believe that as Treasury yields have climbed sharply, bond valuations are becoming more attractive. However, major institutions remain clearly divided on the Fed's future rate path and the timing of a Treasury rebound. Goldman Sachs believes that signs of stress emerging in credit markets, along with improved investor positioning structure and market technical risks, could create conditions for a US Treasury rebound. Citigroup prefers shorter-dated US Treasuries, with its strategists saying that as inflation cools and wage growth weakens, the Fed is unlikely to raise rates to 2023 highs. Morgan Stanley likewise believes Treasury yields are already attractive, but advises investors to wait until after the Fed's policy meeting this month and the US midterm elections before considering entry.
Is the Fed's rate-cut signal hidden in Walmart's stock price? This indicator is once again sounding the recession alarm
Analysis by Jim Paulsen, former chief investment strategist at the Leuthold Group, shows that Walmart shares underperformed from May to August 2026, but since August, Walmart shares have outperformed the S&P Global Luxury Index by about 21%, and Walmart shares are also up about 8% from their late-August low. Paulsen believes this change in relative performance indicates consumers may once again be tightening their budgets, meaning the US economy is losing momentum and future economic weakness could force the Fed to shift back toward easing policy. But if rising energy prices continue to push up overall inflation, or if corporate investment and consumer demand remain strong, policymakers may continue to maintain a tightening stance. In addition, the historical performance of this indicator has also drawn market attention. According to Paulsen's analysis, the "Walmart recession signal" rose noticeably before each of the past four recessions, and since 1990, similar changes have appeared before the start of every Fed easing cycle.
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