U.S. stocks wavered during Tuesday's trading session amid another busy slate of earnings from companies such as Bank of America and Goldman Sachs.
Government bonds were mixed. The yield on the 10-year note slid to 3.579%, while the 2-year note yields rose to 4.218% Tuesday.
As earnings season kicks into full gear this week, the headliners Tuesday morning were the big banks. Bank of America (BAC) posted better-than-expected first-quarter earnings results on the back of higher borrowing costs and rates. The stock edged up 0.59% Tuesday.
Meanwhile, Goldman Sachs (GS) reported a miss on quarterly revenue estimates, hurt by a slowdown in deal-making and offloading a chunk of its Marcus personal loan portfolio. The stock dropped over 3% Tuesday morning.
Bank of New York Mellon (BK) beat first-quarter profit estimates on Tuesday, benefiting from rate hikes as it boosted the lender's interest income, which is the difference between what the bank earns on its loans and pays out on its deposits.
Outside of financial institutions, Southwest Airlines (LUV) stock was off about 1% after the Federal Aviation Authority said in a tweet that the airline requested the agency pause its departures due to an internal technical issue at Southwest. The pause has been fully canceled, the FAA said.
Stocks closed higher on Monday, reversing earlier declines during the trading session as earnings season kicked into gear. The S&P 500 closed up 0.3%.
The biggest gainer was M&T Bank Corporation (MTB), up 7.8% after beating expectations on revenue and profit for the first quarter. The picture was different for State Street Corporation (STT), which was down over 9% after reporting a 3% decline in net interest income in the first quarter.
More earnings are on deck this week. First Horizon (FHN), Western Alliance (WAL), United Airlines (UAL) and Netflix (NFLX) are due after the market closes on Tuesday. Netflix shares edged up 0.29% ahead of earnings and after the company announced it would wind down its DVD-rental business.
On the economic front, housing starts for single-family homes fell 0.8% to a 1.42 million annualized rate, lower than the prior's month reading of 1.45 million homes. Permits to build, a forward-looking gauge for housing activity, fell 8.8% to an annualized rate of 1.41 million, down from last month's figure of 1.55 million homes.
Fed Bank of Atlanta President Raphael Bostic said on Tuesday he agrees with raising rates one more time before holding them above 5% for a while to reach the Fed's goal on inflation. Separately, St. Louis Federal Reserve President James Bullard striked a similar hawkish tone that rate hikes will need to continue.
Meanwhile, Richmond Federal Reserve President Tom Barkin, a non-voting member of the Federal Open Market Committee, which sets interest rates, said on Monday he wants “to see more evidence that inflation is settling back to our target” and that the “labor market has moved from red-hot to merely hot.”
Several Fed officials are expected to speak this week, and market participants are waiting to see if they will sound a similar tune ahead of the Fed’s blackout period, which starts on Saturday.
Investors are becoming increasingly skeptical that the Fed will cut rates anytime soon, Treasuries sold off on Monday, with the 2-year yield climbing to 4.189%, marking its highest closing level in over a month. 10-year note yields actually rose as House Speaker Kevin McCarthy gave a speech on the debt ceiling at the New York Stock Exchange.
“This growing optimism around the economy’s near-term performance means that investors are now almost fully pricing in another Fed rate hike at their meeting on May 3,” Jim Reid and colleagues at Deutsche Bank wrote in a note to clients.
Indeed, data from the CME Group show that markets have priced in an 86% probability that the Federal Reserve will raise interest rates by another 0.25% in May.
Still, Bank of America noted that institutional and individual investors yanked out their positions in US equities for the straight third week amid a stock market rally.
Here are some other trending tickers on Yahoo Finance:
Johnson & Johnson (JNJ): The pharmaceutical giant posted better-than-expected first-quarter revenue and earnings. The company raised its full-year adjusted earnings expectations to a range of $10.60 to $10.70 a share, from $10.45 to $10.65 previously.
Lockheed Martin Corporation (LMT): The defense giant posted first-quarter results surpassing Wall Street estimates and reaffirmed its full-year outlook, projecting net sales in the range of about $65 billion to $66 billion and profits between $26.60 per share and $26.90 per share.
J.B. Hunt Transport Services, Inc. (JBHT): The company missed earnings expectations for the first quarter, lower compared to a year ago, citing effects of a “freight recession” in the brokerage unit.
NVIDIA Corporation (NVDA): Shares climbed Tuesday morning after a price target and ratings upgrade from analysts at HSBC, citing the chipmaker's opportunities in the AI space.
Elsewhere overseas, China's economy rebounded in the first three months of the year after ending its Covid restrictions in nearly three years. China's economy expanded 4.5% in the first quarter of the year, better than 4.0% pace expected by economists, China’s National Bureau of Statistics said Tuesday.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv