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Investors redirected their focus toward Federal Reserve policies, navigating through unfulfilled expectations for significant interest rate reductions. According to New York Fed President John Williams, the current Fed policy is strategically positioned to achieve a "soft landing" for the economy. Meanwhile, Fed Governor Adriana Kugler emphasised that upcoming data will determine future rate decisions, spotlighting Thursday's CPI inflation report that will provide vital clues for interest rate trajectories.

On the earnings front, PepsiCo began the reporting season with a surprising dip in quarterly revenue and a reduced forecast for 2024 sales growth. Despite this, the company’s share prices saw a slight uptick during afternoon trading.

Technology and consumer discretionary sectors led the market action on Tuesday, with sector indices (XLK) and (XLY) rising by about 1.4% and 0.8%, respectively. Major tech companies, particularly Nvidia, fueled a market rally, helping the Nasdaq Composite (^IXIC) gain over 1%. Nvidia’s shares surged as much as 4%, the highest intraday increase since July, driven by optimism surrounding its Blackwell chips.

Conversely, the energy sector lagged behind as crude oil prices (CL=F) fell nearly 4% to trade around $74 per barrel. This decline follows a recent rally spurred by Middle East tensions, now dampened by China’s disappointing stimulus measures. Brent crude (BZ=F) experienced a similar drop, settling just above $77.50.

Deutsche Bank's Chief Equity Strategist Binky Chadha predicts a subdued market reaction during this earnings season. Although Wall Street anticipates a 4.7% earnings growth—a continuation of a five-quarter growth streak—it is expected to be the slowest year-over-year increase since Q4 2023. Chadha suggests the strong market rally preceding the earnings season may temper the typical 2% rise in the S&P 500 (^GSPC) during the initial weeks of earnings reports.

In China, the recent rally in stocks saw a setback on Tuesday as Beijing did not introduce another significant stimulus package, disappointing investors. Hong Kong's Hang Seng Index (^HSI) plummeted about 9%, its worst performance since October 2008, following a 20% rise over the past month due to aggressive monetary stimulus measures. The CSI 300 (000300.SS) index faced volatility, beginning with a 10% rise before closing with a more modest 6% increase. These fluctuations came after China announced substantial economic stimulus on September 24, which initially sparked dramatic inflows into Chinese equities, especially in real estate and consumer staples sectors.