S&P 500 closes up; focus on earnings and US interest rates

THE S&P 500 closed slightly higher on Tuesday, as investors scrutinized a mixed bag of earnings at big US companies and digested comments from US Federal Reserve policy makers for clues about its first planned interest rate cut.

Minneapolis Fed President Neel Kashkari said the central bank is “not done yet” with inflation although he noted it had come down quickly with threemonth and six-month inflation data “basically” at the Fed’s 2% goal.

Also, Cleveland Fed President Loretta Mester said that if the US economy performs as she expects this could open the door to rate cuts. But Ms. Mester said she was not ready yet to suggest timing for easier policy due to inflation uncertainty.

On Sunday, Fed Chair Jerome Powell dashed any remaining hopes for a March rate cut. He had said the Fed can be “prudent” in deciding when to cut with a strong economy allowing time to build confidence that inflation is under control.

“The big macro news today is a couple of Fed governors confirming what Powell said over the weekend. It’s putting a little damper on markets today. It’s a little follow through from yesterday,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

Stocks were down for much of the session before rising just ahead of the close.

The Dow Jones Industrial Average rose 141.24 points or 0.37% to 38,521.36. The S&P 500 climbed 11.42 points or 0.23% to 4,954.23, and the Nasdaq Composite gained 11.32 points or 0.07% to end at 15,609.00.

John Praveen, managing director & co-chief investment officer at Paleo Leon said the Fed should not wait too long to ease policy as troubles at regional Bank NY Community Bancorp spotlight weakness in the rate-sensitive commercial real estate sector.

Mr. Powell also referred to the sector on Sunday. On Tuesday, US Treasury Secretary Janet Yellen said she was concerned about commercial real estate stresses on banks and property owners, yet she believes the situation is manageable with assistance from bank regulators.

Mr. Praveen saw the comments adding to investor jitters.

The KBW Regional Banking index finished down 1.4%, marking a 12.6% drop over six sessions. New York Community Bancorp shares ended down 22.2%. The lender has lost about 60% of its value since it reported a surprise quarterly loss last week citing write-offs for some real estate clients. —