Falling Back.

U.S. stocks are trading in negative territory on Tuesday afternoon as investors, while trying to remain optimistic, find it hard to ignore surging yields.

?? Market Overview

Programming Note: Daily Market Commentary will be off on Wednesday.

Stocks were headed sharply lower in the morning session after the strength of the day’s economic data suggested that the Federal Reserve may have to keep interest rates higher for longer. Stocks then reversed to move higher, and now heading into the close appear to be on track to finish the day lower.

U.S. Treasury yields advanced significantly after retail sales rose 0.7% in September, which far exceeded forecasts, and revealed that American consumers are still strong. Yields remained elevated into the afternoon session and were marching towards 16- and 17-year highs, with the closely followed 10-year yield jumping comfortably above 4.8%. ??

Also beating expectations was U.S. industrial output which rose 0.3% in September versus consensus estimates of a 0.1% rise. U.S. home builder confidence slumped however, falling to its lowest level since January. ?

Investors also heard from a number of Fed officials, with comments from Richmond Fed President Tom Barkin in focus. Barkin said on Tuesday that the U.S. economy may be softening more than is being reflected in the data, offering possible relief to inflation pressure.

Throughout the week, a series of Fed speakers will be delivering speeches, with the highlight being Fed Chair Jerome Powell on Thursday. This will happen ahead of the central bank's blackout period before its next policy meeting. Thus far, fed funds futures traders see the Fed keeping rates unchanged at the conclusion of the meeting on Nov. 1.

In other markets: Oil futures are fluctuating, gold prices were moving higher, and the U.S. dollar is retreating heading into the final hour of New York trade.

Finally, investors continue to monitor geopolitical developments in the Middle East along with the Speaker’s race in the U.S. House of Representatives. ??

Looking Ahead

When is good news, good news? And when is bad news, good news? Two questions investors grappled with for most of today’s trading session.

Strong retail sales and industrial production drove pessimism in the early part of the day as this would mean the Fed would have to keep rates higher for longer. Then optimism reemerged as the strong data, for some anyway, likely means that the economy is strong and that the “soft landing” for the U.S. economy is still in play.

Apparently, fears rise as U.S. Treasury yields keep rising. We maintain that negative variables tied to geopolitical developments, rising yields, and the uncertainty of earnings lurk over markets, and Wall Street cannot ignore these issues forever.

We are?at?best neutral and are moving more bearish?as we feel the current risk-reward environment calls for serious caution and risk management.?

?? What We're Also Following Today

• [14:21 ET] The White House has been discussing the possibility of using military force if Hezbollah joins the war in Gaza and attacks Israel with its huge arsenal of rockets. - AXIOS on Twitter.
• [13:43 ET] US House of Representatives fails to elect speaker on first ballot as no one wins majority of vote.
• [11:31-11:30 ET] Russian Central Bank: OPEC+, at its next meeting, will discuss the possible oil output increase in early 2024 in the event that global oil deficit worsens … Oil output in Iran and Venezuela, exempt from the OPEC+ quotas, may significantly slow down.
• [10:46-10:45 ET] Fed’s Barkin: I am still seeking confirmation that the economy is slowing … The path for inflation is not yet clear, but sees clear progress … ?If recession arrives, it's possible it could be milder than other recent downturns.
• [08:46 ET] US Defense Department: About 2,000 US military personnel places on heightened state of readiness, but no decisions have been made to deploy any forces at this time.
• [08:45 ET] US restricts sale of NVIDIA made-for-China chips in new rules. [S&P 500 & Nasdaq 100 weakened]
• [08:30 ET] US Retail Sales and Core Retails Sales came in hotter than expected. [Dollar strengthened, S&P 500 weakened]

Newswire reports from FinancialJuice

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THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT INVESTMENT ADVICE.?

???SOURCES:?LSEG Workspace, Dow Jones NewsPlus, MarketWatch, Wall Street Journal, Barron’s, FinancialJuice, Investing .com, CNBC, Wells Fargo Investment Institute, TradingView