Stocks posted broad-based gains Tuesday, helped by commentary from Federal Reserve officials downplaying the odds of another interest rate hike at the next Fed meeting.
A bullish forecast from a consumer staples bellwether and the kick off of Amazon.com's (AMZN) fall sale for Prime subscribers also helped boost risk sentiment.
In a week packed with speeches and commentary from central bank officials, Atlanta President Raphael Bostic on Tuesday sounded a dovish note toward future interest rate policy. Bostic said that rates are currently high enough to get the economy back to the Fed's 2% inflation target.
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"The CME FedWatch Tool currently projects an 88% chance that the central bank will hold rates steady at its next meeting, up from 72% last week and 53% one month ago," notes Argus Research.
Rapidly rising global interest rates hampered equities in the earlier part of the month, but stabilizing yields have helped markets post gains for three straight sessions.
"Equity markets have been underpinned by a reprieve in yields and crude oil prices," writes Quincy Krosby, chief global strategist for LPL Financial. "Financial markets are keenly focused on the release of key inflation-related data this week."
As to that last point, note that the September Consumer Price Index is slated for release on Thursday, Oct. 12.
In single-stock news, as mentioned earlier, Amazon kicked off its fall sale for Prime subscribers, and markets approved by adding $13 billion in value to the company's market capitalization. But the real star of Tuesday's show was Pepsico (PEP), which jumped more than 2.4% at one point on an intraday basis.
The soft drinks and snacks maker topped Wall Street's third-quarter earnings and revenue forecasts, and offered a full-year outlook toward the higher end of its outlook. Shares in PEP have been under pressure this year amid concerns over the potential impact of weight loss drugs such as Ozempic and Mounjaro on the company's business.
By the closing bell, the Dow Jones Industrial Average rose 0.4% to 33,739, while the broader S&P 500 added 0.5% to 4,358. The tech-heavy Nasdaq Composite gained 0.6% to end at 13,562.
Seasonality improves from here
The market's recent strength in face of heightened geopolitical uncertainty and rising oil prices shouldn't be too much of a surprise given that we're exiting the seasonally weakest period for equities, experts say.
"From a market standpoint, we are also entering a better period," writes Brad McMillan, chief investment officer for Commonwealth Financial Network. "While September is historically the weakest month of the year, the fourth quarter has been notably better, which may be a tailwind moving forward. The solid economic foundation and improving seasonal factors may give us better results through the end of the year."
Indeed, investors should be pleased to know that, historically, we're about to enter one of the seasonally strongest periods for equities. Have a look at the above chart, and you'll see that since 1928, the S&P 500 has delivered an average price gain of 0.9% in November, 1.3% in December and 1.2% in January, according to Yardeni Research.
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