US Stocks Retreat from Highs as Treasury Yields Creep Above 4%; Netflix Earnings on Tap

After jumping higher at the start of the cash market opening on Tuesday, stocks have given back a considerable amount of their early gains. The major averages are still higher for the session, but have pulled back well off their highs with the blue chip Dow Jones Industrial Average erasing more than half of its early advance.

At 15:36 GMT, the Dow Jones Industrial Average is trading 30365.85, up 180.03 or +0.60%. The benchmark S&P 500 Index is at 3696.02, up 18.07 or +0.49% and the tech-heavy NASDAQ Composite is trading 10710.11, up 34.31 or +0.32%.

Most of the sectors are positive for the session. The biggest gain is in the Industrials, followed by Utilities and Consumer Staples. Three out of 11 sectors are negative led by Energy, down 0.95%. Technology is off by 0.15% and Communication Services is 0.09% in the red.

Initial Rally Spurred by Upbeat Earnings News

Stocks jumped in the pre-market session and the buying continued after the cash market opening. The early rally was led by a positive response to upbeat earnings news from Dow components Johnson & Johnson and Goldman Sachs.

Shares of Johnson & Johnson rose about 2% on better than expected third quarter results before retreating. Goldman Sachs is off its high after gaining close to 4% on news that it beat analyst estimates on both the top and bottom lines.

Industrial Production Posts Strong Performance

In economic news, a Federal Reserve report showed Industrial Production increased by more than expected in the month of September.

The Fed said industrial production rose by 0.4 percent in September after edging down by a revised 0.1 percent in August. Economists were looking for a slight 0.1 percent gain compared to the 0.2 percent dip originally reported for the previous month.

In other news, homebuilder sentiment fell more than expected in October. Rising yields have driven up mortgage rates hurting housing demand.

10-Year Treasury Yields Climb after Reversing Earlier Dip

The yield on the benchmark 10-year Treasury rose on Tuesday after an early bond market rally failed. The 10-year yield is trading about 4 basis points higher at 4.046%.

Falling Crude Oil Prices Drag Energy Stocks Lower

U.S. West Texas Intermediate crude oil futures are down in a volatile trade at the mid-session on Tuesday on fears of higher U.S. supply amid economic slowdown and lower Chinese fuel demand.

On the supply side, the Biden administration plans to sell oil from the Strategic Petroleum Reserve in an effort to cool fuel prices before next month’s congressional elections, sources told Reuters on Monday.

Today’s Key Takeaway

U.S. equity markets are going to have a hard time sustaining any rally unless the 10-year Treasury yield can fall below 4% and stay there for a while.

After the bell on Tuesday, traders will get the opportunity to react to earnings from Netflix, a NASDAQ component.

For the quarter that ended September 30, Wall Street expects Netflix to earn $2.17 per share on revenue of $7.84. This compares to the year-ago quarter when earnings were $3.19 per share on $7.48 billion in revenue. For the full year, ending in December, Netflix’s earnings are projected to decline 10.3% year over year to $10.08 per share, while full-year revenue of $31.67 billion would mark an increase of 6.6% year over year.

For a look at all of today’s economic events, check out our economic calendar.