Miguel Santiago
US stocks rose on Monday, boosted by some positive comments from Federal Reserve Vice Chairman Philip Jefferson. Markets had previously fallen due to geopolitical concerns.
Investors weighed the possible ramifications of a new Middle East conflict between Israel and Palestine. Hamas military group. Over the weekend, Hamas attacked Israel with a surprise attack, after which the country declared war.
Market participants snapped up safe assets like gold and the dollar. Oil prices soared, while energy and defense stocks rose and travel stocks fell.
In the late afternoon, the tech-heavy Nasdaq Composite (IND COMP.) had changed course and was now up to 0.40% at 13,481.64 points. It had previously fallen to ~1%. The S&P 500 (SP500) benchmark index was higher by 0.58% to 4,333.37 points, while the Dow Jones (dji) advanced 0.50% at 33,575.21 points.
Jefferson of the Federal Reserve at a conference in Texas noted that recent inflation data had been encouraging. Additionally, he said that despite the strong September labor market data received last week, there was evidence that the imbalance between labor demand and supply continued to narrow.
Of the 11 S&P sectors, eight were now in positive territory. Consumer staples, consumer discretionary and financials were the three losers.
Energy rose more than 3%, led by Chevron (CVX) and ExxonMobil (XOM), while WTI crude oil futures (CL1:COM) rose as much as 5.6% to $87.39. Analysts generally expect a “knee-jerk rise” in crude prices due to the new conflict, but limited gains thereafter.
Major defense contractors Northrop Grumman (NOC), General Dynamics (GD), and Lockheed Martin (LMT) were among the biggest percentage gainers in the S&P 500 (SP500). By contrast, United Airlines (UAL), Delta Air Lines (DAL) and American Airlines (AAL), along with cruise line operators Carnival Corp (CCL) and Norwegian Cruise Line Holdings (NCLH), were the biggest percentage losers of the S&P.
“So far, the market movement purely reflects a higher risk premium, rather than a change in fundamentals,” ING said. “Israel is a very marginal oil producer, so recent events will have little direct impact on oil supplies. However, given the growing tension in the region and the risk of the conflict spreading, market participants “They will remain nervous until there is a clear solution. de-escalation”.
“While oil fundamentals have not changed since these attacks, that does not mean they will not. There are reports that Iran helped Hamas plan the attacks and gave them the ‘green light’. If this is proven true, “We could see the United States, an ally of Israel, taking a tougher stance against Iran, which could ultimately lead to a reduction in oil supplies,” ING added.
US bond markets were closed on Monday for Columbus Day. See how Treasury yields have performed across the curve on the Seeking Alpha bonds page.
Markets performed positively last week, when a brutal late-September sell-off sparked by the Federal Reserve’s “higher rates for longer” message finally appeared to abate. Traders will be keeping an eye on key inflation data this week in the form of the latest reports on the consumer and producer price indices, which will be the last before the Fed’s next monetary policy decision on November 1.
The economic calendar was light on Monday, with only the TD Ameritrade Investor Movement Index reading on the agenda. The gauge fell slightly to 5.64 in September from 5.70 in August, the first monthly decline in five months.
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