Market Snapshot: Dow, S&P 500, Nasdaq end at all-time highs, extending win streak as traders wait for outcome of Federal Reserve policy meeting

How did stock indexes trade?

The Dow Jones Industrial Average
DJIA,
+0.39%
rose 138.79 points, or 0.4%, to close at an all-time high of 36,052.63.

The S&P 500
SPX,
+0.37%
gained 16.98 points, or 0.4%, to finish at a record 4,630.65.

The Nasdaq Composite
COMP,
+0.34%
advanced 53.69 points, or 0.3%, to end at a fresh peak of 15,649.60.

On Monday, the Dow, S&P 500 and Nasdaq Composite had all closed at records as stocks rose slightly. The S&P 500 has rallied about 23% in 2021.

See: Dow 36,000: Industrials briefly top milestone, putting spotlight on 1999 book

What drove markets?

Stocks traded modestly higher as the Federal Reserve began its two-day meeting on Tuesday, with expectations that the central bank will announce Wednesday that it is going to reduce the rate of its bond purchases.

“The markets are in a bit of a holding pattern today,” as investors wait to hear from the Federal Reserve after it concludes its policy meeting Wednesday, said Jeffrey Schulze, investment strategist at ClearBridge Investments, in a phone interview Tuesday. “I’m expecting the Fed to announce the tapering decision tomorrow,” he said, but “I don’t think the Fed is going to give much guidance on the path of rate hikes.”

The Federal Reserve is “arguably the most dovish central bank in the world,” according to Schulze, who is expecting the U.S. economy to remain strong next year.

Treasury yields eased on Tuesday as investors reduced bets on the extent of central bank policy tightening after Australia abandoned its yield curve control policy but signaled it was unlikely to raise interest rates any time soon. Investors have also priced in a 15-basis point hike from the Bank of England on Thursday as policy makers face a surge in inflation.

“The key question going into this meeting will be to what extent the Fed pushes back against market pricing, which now suggests the Fed will begin raising rates by the middle of 2022,” said Bill Diviney, senior economist at ABN Amro.

Read: Fed seen announcing start of a ‘taper’ of bond purchases this week

Major U.S. stock indexes have rallied to all-time highs on better-than-expected third quarter earnings reports, despite supply chain disruptions and fresh curbs on consumer activity in China and parts of Europe as coronavirus cases rise again in some countries.

“While worsening supply-chain bottlenecks and stubbornly strong goods consumption in the U.S. have raised the risk of more persistent elevated inflation, and uncertainty is high, we continue to think there is a high bar for the Fed to row back on its signaling that the end of asset purchases would not be immediately followed by rate hikes,” Diviney said.

Companies are showing that they can work through supply-chain management issues, which may “dissipate” by the second half of next year, according to Brian Vendig, president of MJP Wealth Advisors in Westport, Connecticut.

Demand is still exceeding supply as “there’s disruption in the short term,” Vendig said Tuesday by phone. “But if you think about it from a standpoint of 12 months or more,” he said, “inventory levels are going to be rebuilt and goods are going to be transported more efficiently to where they need to be.”

In Washington, House Speaker Nancy Pelosi plans to hold votes this week on both the infrastructure bill, already passed by the Senate, and President Joe Biden’s larger budget package. However, some conservative Democratic Party lawmakers have called for a Congressional Budget Office analysis of the bill. Sen. Joe Manchin, D-West Virgina, wavered late Monday on his support for President Joe Biden’s $1.75 trillion domestic policy proposal.

“We’re still going through the sausage-making process of the reconciliation bill,” said Schulze. But it appears that corporate tax hikes will be lower than what was anticipated in September, which has helped support the stock market’s move higher over the past month, he said. 

Which companies were in focus?

Tesla Inc.
TSLA,
-3.03%
was in the spotlight as CEO Elon Musk questioned whether a rally for the electric vehicle maker was driven by an announcement that Hertz Global Holdings Inc.
HTZZ,
+2.66%
would buy 100,000 cars, an order Musk pointed out has not been signed. Tesla is also recalling about 11,700 vehicles because a communication error with the software may cause unexpected activation of the emergency brake system, according to a notice filed with the National Highway Traffic Safety Administration. Tesla shares fell 3%.

DuPont de Nemours Inc.
DD,
+8.79%
shares jumped 8.8% after the materials and chemicals company reported third-quarter profit and revenue that beat expectations but cut its full-year outlook, citing decelerating order patterns resulting from the global semiconductor shortage. Separately, DuPont also announced a deal to buy Rogers Corp.
ROG,
+29.62%
for $5.2 billion in cash. Shares of Rogers soared 29.6%.

Shares of Pfizer Inc.
PFE,
+4.15%
rose about 4.2% after the company beat earnings estimates for the third quarter and raised guidance, boosted by strong sales of its COVID-19 vaccine, Comirnaty.

Shares of Ralph Lauren Corp.
RL,
-9.73%
dropped 9.7% after beating earnings and revenue forecasts, while announcing it expects to resume share repurchases in the second half of fiscal 2022, with about $580 million remaining under its buyback program.

Online education specialist Chegg Inc.
CHGG,
-48.82%
late Monday highlighted a sudden slowdown in the education industry, sending its shares down 48.8%.

Under Armour Inc.
UAA,
+16.47%

UA,
+13.93%
shares jumped 16.5% after the athletic company reported third-quarter earnings that beat expectations and raised its full-year outlook.

Avis Budget Group Inc.
CAR,
+108.31%
shares skyrocketed 108.3% after the car-rental company’s quarterly profit hit a record and sales topped $3 billion as high demand for rental cars in the summer months continued to push prices higher.

What did other markets do?

The yield on the 10-year Treasury note
TMUBMUSD10Y,
1.547%
fell 2.7 basis points to 1.546%. Yields and debt prices move in opposite directions.

The ICE U.S. Dollar Index
DXY,
+0.24%,
a measure of the currency against a basket of six major rivals, rose 0.2%.

Oil futures pulled back, with the U.S. benchmark
CL00,
-0.93%
dipping 0.2% to settle at $83.91 a barrel. Gold futures
GC00,
-0.39%
fell 0.4% to settle at $1,789.40 an ounce.

The Stoxx Europe 600 Index
SXXP,
+0.14%
rose 0.1% in a record close, while London’s FTSE 100
UKX,
-0.19%
fell 0.2%.

The Shanghai Composite
SHCOMP,
-1.10%
fell 1.1%, while the Hang Seng Index
HSI,
-0.22%
lost 0.2% in Hong Kong and Japan’s Nikkei 225
NIK,
-0.43%
shed 0.4%.

—Steve Goldstein contributed to this report.