Stocks Close Higher on Reduced Middle East Risks

The S&P 500 Index ($SPX) (SPY) on Monday closed up +0.39%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.68%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.12%.

Stocks rallied Monday on reduced Middle East geopolitical risks after Israel over the weekend launched only a limited retaliatory strike on some of Iran's missile-related military facilities and air-defense systems and did not bomb any oil infrastructure or civilian infrastructure.  Israel's limited strike reduced concern about the possibility of an all-out conflagration in the Middle East.

Iran said its oil industry was operating normally in the wake of Israel's retaliatory strike.  Dec WTI oil futures prices on Monday plunged -6.13%, which hurt oil-related stocks but helped the majority of other companies where fuel is a major cost input.

Still, stocks traded cautiously ahead of (1) a slew of earnings reports this week, (2) Thursday's Sep PCE price deflator (expected to ease to +2.1% y/y nominal and +2.6% y/y core from Sep's +2.2% and +2.7%, respectively), (3) Friday's US Oct unemployment report (Oct payrolls expected +90,000; Oct unemployment rate expected unchanged at 4.1%), and (4) next Tuesday's US election. 

Also, five of the Magnificent 7 stocks are releasing earnings this week, with releases by Alphabet on Tuesday; Meta and Microsoft on Wednesday; and Amazon and Apple on Thursday.

Corporate Q3 earnings season remains in full gear.  Of the companies in the S&P 500 that have released earnings so far, 76% have surpassed estimates.  According to Bloomberg Intelligence, companies in the S&P 500 are expected to report an average +4.3% y/y increase in quarterly earnings in Q3, down from the +7.9% y/y growth consensus seen in July.

The markets are discounting the chances at 95% for a -25 bp rate cut at the November 6-7 FOMC meeting and at 0% for a -50 bp rate cut at that meeting.

Overseas stock markets closed higher on Monday.  The Euro Stoxx 50 closed up +0.54%.  China's Shanghai Composite index closed +0.68%.   Japan's Nikkei Stock 225 closed up +1.82%.

Interest Rates

December 10-year T-notes (ZNZ24) on Monday fell -9.5 ticks.  The 10-year T-note yield rose +3.2 bp to 4.272%.  Dec T-note prices were undercut by supply pressures ahead of Wednesday's announcement by the Treasury of its near-term funding needs.  The T-note market continues to be pressured by ideas that the US budget deficit will continue to be a major problem regardless of who wins next week's presidential election. T-note prices Monday had some support after the 10-year breakeven inflation expectations rate fell -0.1 bp to 2.293% on the plunge in oil prices.

European government bond yields were mixed.  The 10-year German bund yield fell -0.5 bp to 2.286%.  The 10-year UK gilt yield rose by +2.1 bp to 4.254%.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 43% for a -50 bp rate cut at the same meeting.

US Stock Movers

Oil-related stocks took a hit from Monday's -6% plunge in oil prices.  Diamondback Energy (FANG) fell -3.36%. Occidental Petroleum (OXY), Devon Energy (DVN), Marathon Oil (MRO), Halliburton (HAL), and Conoco Phillips (COP) all fell more than -1%.  Exxon (XOM) fell -0.41%, and Chevron (CVX) fell -0.10%.

Meanwhile, airline and transportation stocks saw support from the plunge in oil prices.  American Airlines Group (AAL) rose +3.50%, Delta Air Lines (DAL) rose +2.41%, and United Airlines Holdings (UAL) rose +2.02%.  Carnival (CCL) rallied +4.91%, and Royal Caribbean Cruises (RCL) rose +1.38%.

Stocks saw support from strength in key mega-cap tech stocks.  Alphabet (GOOG), Apple (AAPL), and Meta Platforms (META) all rose by about 0.8%. 

Other notables on the Nasdaq 100 leaderboard included Moderna (MRNA) with a +3.22% gain, 

Paypal (PYPL) with a +2.31% gain, Airbnb (ABNB) with a +0.89% gain, and Starbucks (SBUX) with a +0.73% gain. 

Chip stocks closed mostly higher, led by ARM Holdings (ARM) with a +4.36% gain, and NXP Semiconductor (NXPI) with a +2.69% gain. 

Boeing (BA) fell -2.71% after launching a $19 billion share sale to reduce debt and try to prevent a ratings downgrade to junk status.

Coinbase (COIN) rallied +5.48% on support from Monday's +4.1% rally in bitcoin.

Earnings Reports (10/29/2024)

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), Advanced Micro Devices Inc (AMD).

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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.