Stock Markets Surge Amid Easing Geopolitical Tensions
Major Indices Show Positive Gains as Earnings Season Approaches
The S&P 500 Index ($SPX) (SPY) closed up +0.39% on Monday. The Dow Jones Industrials Index ($DOWI) (DIA) was up +0.68%, while the Nasdaq 100 Index ($IUXX) (QQQ) increased by +0.12%.
On Monday, stocks enjoyed a boost as fears over Middle East tensions eased. Over the weekend, Israel conducted a limited retaliatory strike against some of Iran’s missile-related military facilities, sparing oil and civilian infrastructures. This measured response has calmed worries of a wider conflict in the region.
Iran reported that its oil industry remained stable following Israel’s actions. As a result, December West Texas Intermediate (WTI) oil futures fell sharply by -6.13%, negatively impacting oil stocks but benefiting many other companies whose costs are tied to fuel prices.
Despite the rally, investors remained cautious ahead of several key events this week. They are awaiting (1) a series of earnings reports, (2) Thursday’s September PCE price deflator, which is expected to drop to +2.1% year-over-year nominal and +2.6% core, down from +2.2% and +2.7% in September, respectively, (3) Friday’s October unemployment report, where payrolls are expected to rise by +90,000, and the unemployment rate to hold steady at 4.1%, and (4) next Tuesday’s US election.
In a noteworthy week for big tech, five of the Magnificent 7 stocks are set to report earnings. Earnings will be released by Alphabet on Tuesday, followed by Meta and Microsoft on Wednesday, and Amazon and Apple on Thursday.
Corporate earnings reporting for the third quarter is in full swing. So far, 76% of S&P 500 companies that have reported exceeded earnings expectations. Bloomberg Intelligence predicts an average increase of +4.3% year-over-year quarterly earnings for the S&P 500 in Q3, a decline from the +7.9% growth anticipated in July.
Currently, market expectations are pricing in a 95% chance of a -25 basis point rate cut at the FOMC meeting on November 6-7, with no expectations for a -50 basis point reduction at that time.
Overseas markets also closed positively on Monday; the Euro Stoxx 50 saw an increase of +0.54%, China’s Shanghai Composite index rose +0.68%, and Japan’s Nikkei Stock 225 climbed +1.82%.
Interest Rates
December 10-year T-notes (ZNZ24) fell -9.5 ticks on Monday. The yield on the 10-year T-note increased by +3.2 basis points to 4.272%. The decline in T-note prices resulted from supply pressures ahead of Wednesday’s announcement from the Treasury about its funding needs. Concerns regarding the US budget deficit persist, regardless of the results of next week’s presidential election. However, T-note prices gained some support after the 10-year breakeven inflation expectations rate dropped -0.1 basis points to 2.293% due to the steep fall in oil prices.
In Europe, government bond yields showed mixed results. The 10-year German bund yield fell by -0.5 basis points to 2.286%. Conversely, the 10-year UK gilt yield rose by +2.1 basis points to 4.254%.
Swaps indicate a 100% probability for a -25 basis point rate cut by the European Central Bank (ECB) at its December 12 policy meeting, with a 43% chance for a -50 basis point cut at the same meeting.
US Stock Movers
Oil-related companies experienced losses following Monday’s -6% drop in oil prices. Diamondback Energy (FANG) fell -3.36%, while Occidental Petroleum (OXY), Devon Energy (DVN), Marathon Oil (MRO), Halliburton (HAL), and ConocoPhilips (COP) all decreased by more than -1%. Exxon (XOM) dipped -0.41%, and Chevron (CVX) saw a slight drop of -0.10%.
On the other hand, airline and transportation stocks benefited from lower oil prices. American Airlines Group (AAL) rose +3.50%, Delta Air Lines (DAL) gained +2.41%, and United Airlines Holdings (UAL) increased by +2.02%. Carnival (CCL) rallied +4.91%, and Royal Caribbean Cruises (RCL) rose +1.38%.
Key tech stocks also contributed positively to market performance. Alphabet (GOOG), Apple (AAPL), and Meta Platforms (META) each rose by approximately +0.8%.
Among other notable gains in the Nasdaq 100 were Moderna (MRNA) with a +3.22% increase, PayPal (PYPL) up +2.31%, Airbnb (ABNB) rising +0.89%, and Starbucks (SBUX) gaining +0.73%.
Chip stocks generally trended positively, led by ARM Holdings (ARM), which gained +4.36%, and NXP Semiconductor (NXPI), up +2.69%.
Boeing (BA) saw a decline of -2.71% after announcing a $19 billion share sale aimed at reducing debt and preventing a downgrade to junk status.
Coinbase (COIN) surged +5.48% on the heels of a +4.1% rise in bitcoin prices.
Earnings Reports Due on 10/29/2024
Investors are looking out for earnings reports from Pfizer Inc (PFE), Ecolab Inc (ECL), Masco Corp (MAS), DR Horton Inc (DHI), Leidos Holdings Inc (LDOS), MSCI Inc (MSCI), American Tower Corp (AMT), Sysco Corp (SYY), Royal Caribbean Cruises Ltd (RCL), PayPal Holdings Inc (PYPL), Phillips 66 (PSX), Stanley Black & Decker Inc (SWK), Zebra Technologies Corp (ZBRA), McDonald’s Corp (MCD), Incyte Corp (INCY), Hubbell Inc (HUBB), Corning Inc (GLW), Qorvo Inc (QRVO), Stryker Corp (SYK), Mondelez International Inc (MDLZ), Chipotle Mexican Grill Inc (CMG), Republic Services Inc (RSG), FMC Corp (FMC), BXP Inc (BXP), Edison International (EIX), Electronic Arts Inc (EA), DaVita Inc (DVA), Extra Space Storage Inc (EXR), Chubb Ltd (CB), ONEOK Inc (OKE), IDEX Corp (IEX), Visa Inc (V), EQT Corp (EQT), First Solar Inc (FSLR), Caesars Entertainment Inc (CZR), Essex Property Trust Inc (ESS), FirstEnergy Corp (FE), Alphabet Inc (GOOGL), and Advanced Micro Devices Inc (AMD).
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On the date of publication, Rich Asplund did not have positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
