Investing.com – Wall Street traded lower on Tuesday as Alcoa began the third-quarter (Q3) reporting season on a sour note and investors continued to up the odds for a rate hike in December.
At 11:07AM ET (15:07GMT), the Dow Jones fell 153 points, or 0.83%, the S&P 500 lost 21 points, or 0.99% and the tech-heavy Nasdaq Composite traded down 57 points, or 1.07%.
In a session with no major economic reports, investors looked to company news for direction as the third-quarter reporting season unofficially kicked off on a sour note.
Alcoa Inc (NYSE:AA) plunged more than 10% after the aluminum company and former Dow Jones component missed consensus on both the top and bottom line.
Despite the disappointing “beginning” analysts expect third-quarter earnings will show a 0.7% decline from a year ago, while revenue for the past quarter is expected to have increased 2.5%, which would be the first year-over-year sales increase for S&P 500 companies since the end of 2014.
Other bad earnings news came in the form of forecasts with Illumina Inc (NASDAQ:ILMN)’s shares crashing around 25% after the diagnostic test masker once again cut its revenue forecast.
Rent-A-Center Inc (NASDAQ:RCII) plunged 32% after the rent to own firm gave a third-quarter forecast that missed consensus.
Shares in St Jude Medical Inc (NYSE:STJ)suffered a 3% drop after the warning that some its implanted heart devices had a battery issue that was linked to two deaths.
In positive news, Yum! Brands Inc (NYSE:YUM) jumped 3% after the owner of Pizza Hut, KFC and Taco Bell said it expects to return as much as $13.5 billion to shareholders by 2019.
Rate hike expectations were on the rise Tuesday, passing the statistically significant threshold of 70% despite the lack of economic data.
At 11:11AM ET (15:11GMT), Fed fund futures put the odds of an increase in December at 74.8%, compared to 69.9% a day earlier, according to Investing.com's Fed Rate Monitor Tool.
Odds had been moving higher recently on the back of a string of positive economic data and particularly hawkish comments from several members of the Fed, above and beyond the three that dissented at the September meeting due to their preference for a 25 basis point hike.
Some analysts had noted that, in the last 25 years, the probability had been at or above this 70% threshold in 90% of the cases wherein the Fed tightened policy, suggesting that it was a “requirement” in order for the central bank to return to policy normalization.
Meanwhile, oil prices moved lower on Tuesday as the International Energy Agency (IEA said that OPEC's oil production rose to record highs in September, underscoring the challenges the group faces as it seeks to curtail its output.
In its closely-watched monthly report, the IEA said OPEC crude output rose by 160,000 barrels a day to a record 33.64 million barrels in September, due to increased production in Iran, Iraq, Libya and Nigeria.
Crude prices rallied on Monday, with Brent climbing to a one-year high after Russian President Vladimir Putin said the country would support the Organization of the Petroleum Exporting Countries’ attempt to cut its collective output.
However, Russian energy minister Alexander Novak said on Tuesday that Moscow was not currently considering a reduction in production, according to a Reuters’ report.
U.S. crude futures fell 0.78% to $50.95 by 11:15AM ET (15:15GMT), while Brent oil lost 0.83% to $52.70.