By Sinéad Carew and Amruta Khandekar
(Reuters) - Wall Street's main indexes ended Tuesday's session with gains as investors looked ahead to the Federal Reserve's monetary policy update while they digested a mixed batch of earnings reports.
The Fed kicked off a two-day monetary policy meeting. The central bank is widely expected to hold interest rates steady on Wednesday, and investors will monitor its statement and Fed Chair Jerome Powell's comments for clues about its plans.
Optimism that the Fed would pause rate hikes was offset by reactions to disappointing earnings reports and jitters over geopolitics.
Shares in heavy-machinery maker Caterpillar (NYSE:CAT) sank 6.7% as signs of slowing demand overshadowed a quarterly earnings beat. And drugmaker Amgen (NASDAQ:AMGN)'s stock fell 2.8% as third-quarter sales of some high-profile medicines were below expectations.
But with 10-year Treasury yields up just slightly for much of the day, some investors looked for bargains in light of recent weakness in stocks, said Sameer Samana, Senior Global Market Strategist at Wells Fargo Investment Institute.
"All roads right now lead back to long-term rates which impact equities," said Samana, adding that in stocks some investors may be encouraged by the idea that, "the recent sell-off brings us back to fairly valued from over-valued levels."
However the strategist was wary of upcoming events that could be huge catalysts for bonds and in turn equities. Along with the Fed's policy update, he is also waiting for the U.S. Treasury Department's financing plans due out on Wednesday.
Analysts have said it is likely to boost the size of auctions for bills, notes, and bonds in the fourth quarter to fund a widening budget deficit. This would cause rates to rise further and hurt stocks, according to Wells Fargo's Samana.
On Friday, investors will also monitor the October U.S. jobs report and the Treasury market's reaction.
The Dow Jones Industrial Average rose 123.91 points, or 0.38%, to 33,052.87, the S&P 500 gained 26.98 points, or 0.65%, to 4,193.8 and the Nasdaq Composite added 61.76 points, or 0.48%, to 12,851.24.
All 11 of the S&P 500's major industry sectors advanced, with real estate up 2% and leading gains, while the biggest laggard, communication services, gained 0.2%.
"Today's move back into positive territory is on the growing consensus the Fed is more likely to hold off on any more rate hikes this year," said Greg Bassuk, chief executive of AXS Investments in New York.
Bassuk also pointed to mixed earnings reports and companies "messaging concerns about upcoming quarters with energy prices rising and increasing uncertainty" around wars in Israel and Ukraine that are "showing no end in sight."
All three of Wall Street's major averages registered their third monthly loss in a row.
For the S&P 500, down 2.2% for the month, and the Dow, off 1.4%, it was the longest monthly losing streak since the pandemic roiled markets in early 2020.
Nasdaq which lost 2.8% in October, last fell for three straight months in the period ending June 2022.
Earlier in the day, data showing a solid increase in U.S. labor costs in the third quarter prompted some concerns the Fed could keep interest rates higher for longer.
Of the 279 companies in the S&P 500 that have reported earnings to date, over 78% have beaten analyst estimates, per LSEG data. Analyst expect earnings growth of 4.9% for S&P 500 companies in the third quarter.
In individual stocks, Nvidia (NASDAQ:NVDA) shares closed well above their session low but still down 0.9%, after a report said the latest U.S. curbs could force the chip designer to cancel billions of dollars of orders to China.
Pinterest (NYSE:PINS) shares ralled 19% after the image-sharing platform beat third-quarter revenue and profit estimates.
VF Corp (NYSE:VFC) shares sold off almost 14% after the Vans sneaker maker withdrew its annual forecast. But Arista Networks (NYSE:ANET) stock rallied 14% after it gave an upbeat fourth-quarter revenue outlook.
Sarepta Therapeutics (NASDAQ:SRPT) shares plummeted 37.5% on the failure of its muscle disorder gene therapy in a late-stage trial. Shares of Sarepta's client, Catalent (NYSE:CTLT), fell 13.9%.
Advancing issues outnumbered declining ones on the NYSE by a 2.31-to-1 ratio; on Nasdaq, a 1.69-to-1 ratio favored advancers.
The S&P 500 posted 1 new 52-week highs and 15 new lows; the Nasdaq Composite recorded 16 new highs and 262 new lows.
On U.S. exchanges 10.67 billion shares changed hands compared with the 10.64 billion average for the last 20 sessions.