Wall Street rallies, Treasury yields rise as high profile earnings loom
All three major U.S. indexes started the session with solid gains in a broad rally that favored economically sensitive sectors such as transports, consumer discretionary and materials.
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WASHINGTON: Wall Street rebounded from Friday's selloff and benchmark Treasury yields rose as investors embarked upon the first full week of third quarter corporate results while keeping a close eye on the Israel-Hamas war. All three major U.S. indexes started the session with solid gains in a broad rally that favored economically sensitive sectors such as transports, consumer discretionary and materials.
Israeli forces continued their bombardment of Gaza after efforts to arrange a cease fire stalled as the conflict entered its tenth day. "There's some optimism among investors about earnings season and as they watch the situation in the Middle East," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. "There’s feeling that we got through the weekend and we’re beginning earnings season and we’ll see where it takes us."
A spate of big bank earnings reports on Friday marked the unofficial beginning third quarter earnings season, and the coming week promises to turn up the heat, with Bank of America , Goldman Sachs Group, Netflix, Tesla and a host of heavy-hitting industrials on deck. Economic data was also sparse on Monday, with the New York Fed's Empire State index posting a shallower than expected decline. Retail sales, industrial production, housing starts and existing home sales fill out the week's roster.
"The economy is continuing to move ahead albeit at a slower pace," Pavlik said. "We will be able to avoid recession and if the Fed holds rates steady going forward, a soft landing is well within their reach." The Dow Jones Industrial Average rose 362.5 points, or 1.08%, to 34,032.79, the S&P 500 gained 49.67 points, or 1.15%, to 4,377.45 and the Nasdaq Composite added 158.91 points, or 1.19%, to 13,566.14.
European stocks were muted by geopolitical concerns, but were given a lift after elections in Poland suggested the ruling nationalist party could fall short of a majority. The pan-European STOXX 600 index rose 0.45% and MSCI's gauge of stocks across the globe gained 0.76%.
Emerging market stocks lost 0.45%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.59% lower, while Japan's Nikkei lost 2.03%. U.S. Treasury yields inched higher as the government increased debt issuance while an expected Israeli ground invasion of Gaza kept markets in a tentative mood.
Benchmark 10-year notes last fell 19/32 in price to yield 4.706%, from 4.629% late on Friday. The 30-year bond last fell 40/32 in price to yield 4.8642%, from 4.779% late on Friday.
The greenback lost ground against a basket of world currencies as a strengthening euro outweighed a weakening yen ahead of a week that promises to be heavy with commentary from Fed officials, and as developments in the Middle East continue to be monitored. The dollar index fell 0.28%, with the euro up 0.37% to $1.0548.
The Japanese yen weakened 0.09% versus the greenback at 149.70 per dollar, while Sterling was last trading at $1.2183, up 0.35% on the day. Crude prices inched lower as investors kept watch for signs of escalation in the Israel-Hamas conflict.
U.S. crude fell 1% to $86.81 per barrel and Brent was last at $90.01, down 0.97% on the day. Gold slid, backing down from Friday's rally despite geopolitical worries.
Spot gold dropped 0.8% to $1,916.80 an ounce.
