Stocks Rise Amid Decreased Middle East Tensions
The S&P 500 Index ($SPX) (SPY) is up +0.45%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.17%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.39%.
Market Boosted by Reduced Geopolitical Risks
Stocks are performing well today as fears regarding the Middle East have eased. Over the weekend, Israel executed a limited retaliatory strike focused on specific military sites related to Iran’s missile operations. Importantly, no oil or civilian infrastructure was affected, reducing concerns about a larger conflict. Iran maintained that its oil industry continues to function normally. Consequently, oil prices have dropped over -6%, causing declines in oil-related stocks while benefiting companies reliant on fuel.
Investors Wait for Key Reports
Despite the positive movement in stocks, caution prevails ahead of several important events: (1) numerous earnings reports are forthcoming this week; (2) the U.S. unemployment report for October arrives on Friday, with payrolls expected to rise by +90,000 and the unemployment rate anticipated to stay at 4.1%; and (3) next Tuesday’s national elections. Notably, five major tech stocks from the “Magnificent 7” will report their earnings, including Alphabet on Tuesday, Meta and Microsoft on Wednesday, and Amazon and Apple on Thursday.
Q3 Earnings Season Progress
This quarter’s earnings season is well underway. Thus far, 76% of S&P 500 companies that have reported earnings have exceeded expectations. According to Bloomberg Intelligence, a +4.3% increase in quarterly earnings is anticipated for Q3 year-over-year, which represents a decline from July’s consensus of +7.9% growth.
Market Forecasts and Foreign Markets
The market predicts a 96% probability of a -25 basis point rate cut during the FOMC meeting scheduled for November 6-7, with no expectations for a -50 basis point cut at that time. Internationally, stock markets are also on the rise, with the Euro Stoxx 50 up +0.24%, China’s Shanghai Composite closing +0.68%, and Japan’s Nikkei Stock 225 adding +1.82%.
Interest Rate Movements
In the bond market, December 10-year T-notes (ZNZ24) have fallen -3 ticks, keeping the 10-year T-note yield steady at 4.240%. Supply pressures loom ahead of the Treasury’s announcement on funding needs, yet T-note prices have support following a -1.1 basis point drop in 10-year breakeven inflation expectations to 2.282%, spurred by oil’s significant price drop.
European Bond Yields Lower
In Europe, government bond yields have decreased, with the 10-year German bund yield down -3.8 basis points to 2.253% and the 10-year UK gilt yield down -3.7 basis points to 4.196%. Swaps are pricing in a 100% probability of a -25 basis point rate cut by the European Central Bank for its policy meeting on December 12, as well as a 47% chance of a -50 basis point cut.
Movers on the US Stock Market
Today’s sharp drop in oil prices has adversely affected energy stocks. Companies like Marathon Oil (MRO), ConocoPhillips (COP), Occidental Petroleum (OXY), Hess Corp (HES), Valero Energy (VLO), and Devon Energy (DVN) are all down more than -1%. Exxon (XOM) and Chevron (CVX) have also dipped approximately -0.8%.
Conversely, airline and transportation stocks are gaining from the decline in oil prices. American Airlines Group (AAL), United Airlines Holdings (UAL), and Delta Air Lines (DAL) have increased more than +3%. Additionally, Carnival (CCL) has risen +4.5%, and Royal Caribbean Cruises (RCL) is up +1.1%.
Technology stocks are performing well today, with Alphabet (GOOG), Meta (META), and Amazon (AMZN) all rising by more than +1%. Other notable performers include Airbnb (ABNB), PayPal (PYPL), and Starbucks (SBUX), each seeing gains exceeding +1%.
In contrast, chip stocks are struggling, particularly ON Semiconductor (ON), which dropped -4% following a disappointing earnings report. GlobalFoundries (GFS) is also affected, down nearly -2% after receiving a downgrade from Morgan Stanley due to pricing pressures in the wafer market.
Boeing (BA) has declined nearly -2% as it has kicked off a $19 billion share sale designed to lessen its debt load and stave off a potential ratings cut.
Upcoming Earnings Reports
On October 28, 2024, several companies will release their earnings, including Brown & Brown Inc (BRO), Cadence Design Systems Inc (CDNS), CenterPoint Energy Inc (CNP), F5 Inc (FFIV), Ford Motor Co (F), ON Semiconductor Corp (ON), Regency Centers Corp (REG), SBA Communications Corp (SBAC), Waste Management Inc (WM), and Welltower Inc (WELL).
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On the date of publication, Rich Asplund did not have (either directly or indirectly) 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 the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
