U.S. stocks were slightly lower Monday as investors edged away from equities and other assets perceived as risky in favor of traditional havens after a surprise attack by Hamas on Israel over the weekend raised geopolitical alarms.
What’s happening
-
The Dow Jones Industrial Average
DJIA
was down 26 points, or 0.1%, at 33,382. -
The S&P 500
SPX
fell 11 points, or 0.3%, to 4,295. -
The Nasdaq Composite
COMP
was down 102 points, or 0.8%, at 13,329.
Stocks bounced Friday after a stronger-than-expected September jobs report, allowing the S&P 500 to rise 0.5% for the week and break a streak of four straight weekly declines. The Dow saw a 0.3% weekly decline, while the Nasdaq Composite rose 1.6%.
What’s driving markets
The attack by Hamas on Israel raised fears of a broader conflict.
“Such geopolitical tension is traditionally and unsurprisingly negative on sentiment, with investors likely to be unsettled by the prospect of further uncertainty,” said Richard Hunter, head of markets at Interactive Investor.
The price of Brent crude
BRN00,
the global energy benchmark, jumped nearly 4% amid concerns oil supplies from the region may be compromised.
Need to Know: From $150 oil to no impact at all: What the surprise attack on Israel means to markets
“The shocking attacks in Israel have sent the price of oil soaring, as investors assess the potential for the conflict to disrupt supply in the Middle East, if other countries are drawn in,” said Susannah Streeter, analyst at Hargreaves Lansdown.
U.S. stock futures dived as bourses in much of Europe and Asia sold off, while traders moved into the perceived havens of gold
GC00,
the U.S. dollar
DXY
and government bonds, such as the German bund
BX:TMBMKDE-10Y.
See: Gold, U.S. dollar rally as investors flock to havens as Israel-Hamas war escalates
The U.S. Treasury market is closed on Monday for Columbus Day and Indigenous Peoples’ Day, but futures
TY00,
are trading and these indicate falling benchmark yields.
“Geopolitical risk doesn’t tend to linger long in markets but there are many second order impacts that could come through in the weeks, months and years ahead from this weekends’ developments,” said Jim Reid, strategist at Deutsche Bank.
Indeed, traders may find their focus soon switches this week back to monetary and corporate issues. Markets ultimately reacted positively to what on the surface was a strong nonfarm payrolls report published Friday, as traders believed it was not so hot it would move the needle on Fed policy.
With that in mind, the U.S. producer and consumer prices data for September will be published on Wednesday and Thursday, respectively, with further evidence of easing price pressure required to cement no more rate increases by the Federal Reserve this year.
Then Friday sees the start proper of the third-quarter company-earnings season, when big banks such as JPMorgan Chase
JPM,
Citigroup
C,
and Wells Fargo
WFC,
present their results.
Earnings Watch: Q3 earnings are here: S&P 500 heads toward year of profit declines as JPMorgan, and Delta report this week
Forecasts suggest analysts have become less confident about corporate profitability in recent weeks. Aggregate S&P 500 earnings are expected to decline by 0.3% for the year to Q3 2023, which would mark the fourth consecutive quarter of falling earnings, according to John Butters, senior earnings analyst at FactSet.
Source: FactSet
Read: Good for stocks? Why Tom Lee says the attack on Israel could help equities.
Companies in focus
-
Shares of defense contractors, including RTX Corp.
RTX,
+4.18%
and Lockheed Martin Corp.
LMT,
+7.98% ,
rose after the surprise attack on Israel by Hamas over the weekend. -
Energy companies, including Marathon Petroleum Corp.
MPC,
+1.63%
and Occidental Petroleum Corp.
OXY,
+4.05% ,
saw shares rise as crude prices rallied. -
Walt Disney Co.
DIS,
+0.92%
was in focus after The Wall Street Journal reported, citing sources, that activist investor Nelson Peltz’s Trian Fund Management has upped its stake in a bid to get several more seats on the company’s board. Shares rose 0.6%.