(Reuters) - U.S. stocks rose on Tuesday, with the S&P 500 and Nasdaq notching their longest streak of gains in two years, as a retreat in U.S. Treasury yields buoyed megacap growth stocks while investors sought more clarity on interest rates from the Federal Reserve.
The benchmark 10-year Treasury note yield was on pace for its fifth decline in six sessions on expectations the Fed is done with its rate hike cycle. Yields extended losses after a solid auction of $48 billion in 3-year notes with auctions of the 10-year note and 30-year bond due later this week.
Expectations that the Fed's rate hike cycle is at an end have increased in recent days, but the market remains sensitive to the possibility of more hikes, and central bank officials have been cautious in comments on the future rate path.
Markets are pricing in a 90.2% chance the Fed will once again hold rates steady at its December policy meeting, up from 68.9% a week ago, according to CME's FedWatch Tool.
Fed Governor Christopher Waller said on Tuesday that third-quarter U.S. economic growth, at an annualized 4.9% rate, was a "blowout" performance that warrants watching as the central bank considers its next policy moves. Fellow Governor Michelle Bowman said she took the recent Gross Domestic Product number as evidence the economy not only "remained strong," but might have gained speed and requires a higher Fed policy rate.
Federal Reserve Bank of Minneapolis President Neel Kashkari and Chicago Fed President Austan Goolsbee also refused to rule out rate cuts.
Fed Chair Jerome Powell is set to speak on Wednesday and Thursday.
"That is the story today, that the Fed is done, but yesterday it was maybe not. Powell is going to speak on Thursday so that is going to leave the door open," said Ken Polcari, managing partner at Kace Capital Advisors in Boca Raton, Florida.
"But what the market is telling you - the market, traders - are pushing for is we're all done, it's a rate cut, almost as if they are trying to force the hand."
The pullback in yields helped lift megacap growth names such as Microsoft (NASDAQ:MSFT), up 1.1%, Apple (NASDAQ:AAPL), up 1.5%, and Amazon (NASDAQ:AMZN), which gained 2.1% as the biggest boosts to both the S&P 500 and Nasdaq.
The Dow Jones Industrial Average rose 56.94 points, or 0.17%, to 34,152.8; the S&P 500 gained 12.40 points, or 0.28 %, at 4,378.38 and the Nasdaq Composite added 121.08 points, or 0.90 %, at 13,639.86.
The S&P 500 scored its seventh straight day in the green, with the Nasdaq recording its eighth straight advance, the longest such streak for each index in two years. The Dow gained for a seventh straight session, its longest since a 13-session run in July.
Energy, the worst performing sector on the session, fell 2.2% as crude prices settled down more than 4% on demand concerns and a firmer dollar.
Dallas Federal Reserve Bank President Lorie Logan also chimed in, saying that while she supported leaving the Fed's policy rate on hold last week to assess if financial conditions are sufficiently tight to bring down inflation, it still remains too high.
Uber Technologies rose 3.7% as the ride-hailing firm projected fourth-quarter adjusted core profit above estimates.
Datadog surged 28% after raising its forecast for annual adjusted profit and revenue.
Declining issues outnumbered advancers by a 1.2-to-1 ratio on the NYSE, while on the Nasdaq declining issues outnumbered advancers by a 1.1-to-1 ratio.
The S&P 500 posted 15 new 52-week highs and three new lows while the Nasdaq recorded 48 new highs and 145 new lows.
Volume on U.S. exchanges was 10.08 billion shares, compared with the 10.94 billion average for the full session over the last 20 trading days.