Stocks Higher on Relief After Israel's Limited Retaliation Reduces Middle East Risks

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%.

Stocks today are trading higher 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 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. Oil prices this morning have plunged more than -6%, which hurt oil-related stocks but helped the majority of other companies where fuel is a major cost input.

Still, stocks are trading cautiously today ahead of (1) a slew of earnings reports this week, (2) Friday's US Oct unemployment report (Oct payrolls expected +90,000; Oct unemployment rate expected unchanged at 4.1%), and (3) next Tuesday's US election.  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% increase in quarterly earnings in Q3 from a year ago, down from the +7.9% growth consensus seen in July.

The markets are discounting the chances at 96% 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 today are trading higher.  The Euro Stoxx 50 is up +0.24%.  China's Shanghai Composite index today closed +0.68%.   Japan's Nikkei Stock 225 closed up +1.82%.

Interest Rates

December 10-year T-notes (ZNZ24) today are down -3 ticks.  The 10-year T-note yield is unchanged at 4.240%.  Dec T-notes are being undercut by supply pressures ahead of Wednesday's announcement by the Treasury of its near-term funding needs.  T-note prices have underlying support after the 10-year breakeven inflation expectations rate fell -1.1 bp to 2.282% on today's plunge in oil prices.

European government bond yields today are lower.  The 10-year German bund yield is down -3.8 bp at 2.253%. The 10-year UK gilt yield is down by -3.7 bp at 4.196%.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 100% for the December 12 policy meeting and a 47% chance of a -50 bp rate cut at the same meeting.

US Stock Movers

Energy-related stocks are taking a hit on today’s -6% plunge in oil prices.  Marathon Oil (MRO), Conoco Phillips (COP), Occidental Petroleum (OXY), Hess Corp (HES), Valero Energy (VLO), and Devon Energy (DVN) are all trading more than -1% lower.  Exxon (XOM) and Chevron (CVX) are both down about -0.8%.

Airline and transportation stocks are seeing support today from the plunge in oil prices.  American Airlines Group (AAL), United Airlines Holdings (UAL), and Delta Air Lines (DAL) are all trading more than +3% higher.  Carnival (CCL) is up +4.5%, and Royal Caribbean Cruises (RCL) is up +1.1%.

Stocks are seeing support today from strength in key mega-cap tech stocks.  Alphabet (GOOG), Meta (META), and Amazon (AMZN) are all up more than +1%.   Other notable stocks on the leaderboard include Airbnb (ABNB), Paypal (PYPL), and Starbucks (SBUX), with gains of more than +1%.

Chip stocks are under pressure today after ON Semiconductor (ON) fell -4% after a disappointing earnings report. Also, GlobalFoundries  (GFS) is down nearly -2% after a downgrade to equal-weight from overweight at Morgan Stanley due to wafer-pricing pressures. 

Boeing (BA) is down nearly -2% after launching a $19 billion share sale to reduce debt and try to prevent a ratings downgrade.

Earnings Reports (10/28/2024)

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), 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.