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What you need to know today

Markets in holding pattern
U.S. stocks struggled to make any meaningful moves Tuesday as Treasury yields rose — the 2-year yield hit a 17-year high. Europe's Stoxx 600 index shed 0.1% amid mixed economic news. In the U.K., average earnings excluding bonuses grew 7.8% year on year, the first time since January that the pace has slowed. In Germany, economic sentiment in October improved more than expected.

Unstoppable U.S. consumer
U.S. retail sales in September increased 0.7% month on month, far more than the 0.3% Dow Jones estimate, according to an advance report from the Commerce Department. Sales excluding autos rose 0.6%, three times the expected 0.2%. "The U.S. consumer cannot stop spending," said David Russell, global head of market strategy at TradeStation.

Profit plunge at Goldman
Goldman Sachs posted better-than-expected profit and revenue for the third quarter. Still, year on year, profit sank 33% to $2.058 billion and revenue dipped 1% to $11.82 billion. A breakdown of the bank's revenue performance: Bond trading revenue fell 6%, equities trading revenue rose 8% and investment banking revenue inched up 1%. Investors weren't impressed, causing Goldman shares to drop 1.6%.

Profit pop at Bank of America
Bank of America beat Wall Street's estimates for earnings and revenue in the third quarter. Profit popped 10% from a year ago to $7.8 billion and revenue rose 2.9% to $25.32 billion. Rising interest rates and loan growth juiced BofA's interest income 4% to $14.4 billion. Investors cheered the results, rewarding the bank with a 2.33% bump in its shares.

[PRO] Buy gold, underweight stocks
All three major indexes are in the green for October. But JPMorgan's top strategist isn't convinced. This is his advice: Buy gold. And don't buy so many stocks. High bond yields, interest rates and the Israel-Hamas war remain risks to financial markets, he said.

The bottom line

Markets wavered Tuesday as investors digested September's U.S. retail sales report and third-quarter earnings from banks.

Consumers spent much more last month than economist had expected, which "puts us on track for a strong GDP number later this month," said David Russell of TradeStation, an online trading and brokerage firm. Following the retail report, Goldman Sachs boosted its forecast for third-quarter gross domestic product by 0.3 percentage points to 4%. That'd be the highest quarterly growth since the last quarter of 2021.

Narratives of a "soft landing" scenario, in which the U.S. economy subdues inflation without tipping into a recession, were reinforced by yesterday's economic data. The "economy is on track for a soft-ish landing following healthy consumer activity, cooling inflation, and solid growth," wrote UBS' chief investment office.

A growing economy, in turn, is good news for corporate earnings and stocks. In the same note, UBS said "the profits recession is over," meaning that earnings per share for S&P 500 companies should grow starting from the third quarter.

But the retail report isn't all roses. The hot spending data will come "to the Fed's dismay," said Gina Bolvin, president of Bolvin Wealth Management, because the central bank "won't like that higher rates are not deterring consumers from spending."

Concurring, Russell said "it also gives the Fed zero reason to loosen policy, which keeps the 10-year Treasury yield pushing toward 5%."

Indeed, Treasury yields jumped yesterday to multiyear highs, pressurizing stocks despite a good start to earnings season. (Of the companies that have reported so far, 83% have surpassed earnings estimates.)

Major indexes made hesitant moves in both directions. The S&P 500 slipped a miniscule 0.01%, the Nasdaq Composite lost 0.25% while the Dow Jones Industrial Average eked out the merest gain of 0.04%.

If bond yields continue rising, it's possible earnings reports might not have a big effect on the overall stock market. As Chris Zaccarelli, chief investment officer of the Independent Advisor Alliance, put it, "It's more the bond market driving the stock market at this point."