Markets are awaiting Wednesday's release of the U.S. September Consumer Price Index, with investors watching whether higher energy prices are feeding into broader inflation pressures. The dollar fell against most major currencies on Tuesday, longer-dated Treasury yields declined, and U.S. stocks ended slightly lower after a volatile session. Ongoing tensions in the Middle East continued to raise concerns over supply and shipping routes, pushing oil prices higher. Boston Federal Reserve President Susan Collins also reiterated her support for another rate increase before year-end, adding to the market's focus on how the CPI report could affect the interest-rate outlook.
Dollar Gives Back Gains as Canadian Dollar Leads
The dollar declined against all major currencies late Tuesday. Its largest loss was against the Canadian dollar, while its decline against the Japanese yen was the smallest. The greenback had strengthened on Monday, but positioning ahead of the CPI release prompted investors to unwind part of that move.
Late-session exchange rates were: EUR/USD at 1.1196, up 0.39%; USD/JPY at 158.30, down 0.20%; GBP/USD at 1.3251, up 0.34%; USD/CHF at 0.8324, down 0.24%; USD/CAD at 1.4213, down 0.48%; AUD/USD at 0.6981, up 0.32%; and NZD/USD at 0.5611, up 0.45%.
Higher oil prices supported the Canadian dollar. Technical factors also influenced USD/CAD, although traders continued to monitor the pair's support levels. Ahead of the CPI release, currency moves reflected a broader reassessment of inflation risks and the Federal Reserve's policy path.
Long-Dated Treasury Yields Fall as Curve Flattens
U.S. Treasury yields moved in different directions. The two-year yield rose 0.64 basis points to 4.7974%, while the five-year yield fell 1.25 basis points to 5.0085%. The 10-year yield declined 2.72 basis points to 5.2168%, and the 30-year yield dropped 3.33 basis points to 5.5660%.
The larger declines at the long end flattened the yield curve. Lower long-term yields eased some financing-cost pressure, but the 10-year yield remained above 5.2%, continuing to weigh on equity valuations and corporate borrowing conditions.
New York Fed President John Williams said another rate increase this year would be appropriate, but that further hikes in 2027 are not currently necessary. He expects inflation to slow significantly next year and move close to the Fed's 2% target. His comments reduced concern about additional tightening in 2027, but did not signal rate cuts. The policy outlook remains dependent on whether inflation declines as expected.
Major U.S. Indexes Close Lower After Sharp Intraday Swings
The modest losses at the close masked wide intraday moves. The Dow Jones Industrial Average rose as much as 466.06 points before falling roughly 263 points from its high. The S&P 500 and Nasdaq Composite also moved repeatedly between gains and losses, while the Nasdaq 100 remained in negative territory throughout the session.
Near the close, the Dow stood at 51,675.16, down 181.02 points, or 0.35%. The S&P 500 fell 1.79 points, or 0.02%, to 7,805.45. The Nasdaq Composite declined 41.52 points, or 0.15%, to 27,204.38. The Russell 2000 dropped 11.11 points, or 0.40%, to 2,783.37, and the Nasdaq 100 fell 95.22 points, or 0.31%, to 30,569.48.
Most major European indexes also closed slightly lower, while Italy's market posted a marginal gain. Germany's DAX fell 0.07% to 25,259.91; France's CAC 40 declined 0.07% to 7,827.64; the UK's FTSE 100 slipped 0.06% to 10,650.34; Spain's IBEX 35 fell 0.39% to 19,210.70; and Italy's FTSE MIB rose 0.04% to 50,057.17.
Earnings Season Begins With Guidance and Valuations in Focus
JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs, Johnson & Johnson and UnitedHealth reported results, marking the start of the earnings season. Earlier in the session, all six stocks were trading lower.
Goldman Sachs exceeded expectations on both earnings and revenue, while JPMorgan missed on both measures. Results relative to forecasts were not the only factor driving share prices, however. Investors were also assessing company guidance, valuations, and the broader environment of elevated energy costs and interest rates.
Collins Flags Broader Inflation Risks Ahead of CPI
Boston Fed President Susan Collins said economic uncertainty remains high and that she is monitoring how widely inflationary pressure is spreading. She has previously supported another rate increase by the end of 2026, noting that artificial intelligence and data-center investment, tariffs, and energy costs linked to the conflict in the Middle East could keep inflation elevated.
Higher energy prices directly raise headline inflation. If prices for goods and services also accelerate broadly, that could point to more widespread pressure and strengthen the case for additional tightening. Williams said price pressures were limited outside areas linked to artificial intelligence and energy, with no evidence that the labor market was driving inflation. He expects inflation to slow substantially, but his view does not rule out another rate increase this year.
The September CPI report is due at 8:30 a.m. Eastern time on Wednesday. The market expects headline CPI to rise 0.6% month on month and about 3.7% year on year. Core CPI is forecast to increase about 0.2% month on month, with the annual rate holding near 2.4%.
The core reading and the breadth of price increases will be important in determining whether inflation is becoming more widespread. A stronger-than-expected report could revive expectations of an earlier rate increase, while a softer reading could give the Fed more room to wait for additional information.
Existing-Home Sales Edge Above Forecasts
U.S. existing-home sales ran at an annualized rate of 3.99 million units in September, above the market estimate of 3.95 million. Sales rose 1.5% from August but remained 2.2% below the level a year earlier.
Sales increased month on month in the South and West, were unchanged in the Midwest and declined in the Northeast. Sales were lower year on year in all four regions.
Rising inventories and longer selling times gave buyers somewhat more negotiating power, but higher mortgage rates remained a barrier to purchases. The modest improvement in sales did little to shift the market's focus away from inflation and the Fed's policy outlook.
Middle East Risks Lift Oil as Precious Metals Fall
Crude oil futures settled at $94.14 a barrel, up $0.40, or 0.43%. In subsequent pricing, the CL1! contract stood at $94.93, up $1.19, or 1.27%.
Reports that U.S. President Donald Trump and Israeli Prime Minister Benjamin Netanyahu discussed possible new action against Iran, threats to shipping near the Strait of Hormuz, and Saudi-led forces striking an oil facility in Yemen linked to the Houthi movement kept supply and shipping risks in focus.
Persistently higher oil prices affect more than the energy market. They can also raise transportation and production costs, adding to headline inflation pressure. Spot gold was around $4,159.65 an ounce, down $12, or 0.29%, while silver stood at $59.1325, down $1.164, or 1.93%.
A weaker dollar and lower long-term yields would normally offer support to gold, but precious metals still fell on Tuesday. The available information did not identify a specific trigger for silver's decline.
Bitcoin traded at $83,314, up $1,568, or 1.92%, diverging from the weaker performance of stocks and precious metals. The dollar's decline may have provided some support, but a single session is not enough to establish a lasting change in bitcoin's relationship with other risk assets.