(Bloomberg) — Stocks rose and bonds fell amid diplomatic efforts to prevent the war between Israel and Hamas from expanding into a regional conflict. Oil fell, after last week’s rise.
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The S&P 500 added about 1%, with traders also bracing for a raft of earnings reports. 10-year Treasury yields rose 10 basis points to 4.71%. The dollar fell. Bitcoin pared gains after rising as much as 10%, with BlackRock saying its application for an exchange-traded fund that invests directly in the cryptocurrency was still under review. The Israeli shekel has reached its lowest level in eight years.
Read: HSBC chief sees bond capitulation nearing the end: Watch
Wall Street’s quest for a safe haven has waned as President Joe Biden considered a trip to Israel as part of a campaign to prevent the war from spreading. Secretary of State Anthony Blinken also returned to Israel to meet with Prime Minister Benjamin Netanyahu, after talks with Arab governments. Russian President Vladimir Putin made a phone call with the leaders of Egypt, Syria, Iran and the Palestinian Authority, and the Kremlin said there was a “unanimous opinion” on the necessity of a ceasefire. He spoke separately with Netanyahu.
“The price action does not reflect an improvement in investors’ expectations of the Israeli conflict, but rather the absence of a major escalation,” said Ian Lingen, head of US interest rates strategy at BMO Capital Markets.
Read: Five key charts to watch in global commodities this week
Aside from geopolitics, traders will also focus on corporate results this week.
Earnings expectations are weakening and could remain weak, according to strategists from Morgan Stanley to JPMorgan Chase & Co.
As reporting season begins, Morgan Stanley’s Michael Wilson said the range of earnings revisions — referring to the number of stocks seeing upgrades versus downgrades — for the S&P 500 has fallen sharply over the past two weeks. Citigroup’s Earnings Revisions Index shows that cuts have outpaced upgrades for four straight weeks ahead of the reporting season. Mislav Matica, a strategist at JP Morgan, expects this to continue.
However, stock price reactions show the reporting season is off to a “good start,” with Russell 1000 companies outperforming estimates at the second-highest rate in the past year and a half, according to RBC Capital Markets strategists.
Big technology
Investors looking to earnings season for a dose of good news are pinning their hopes on a familiar group: Big Tech companies.
The five largest companies in the S&P 500 index – Apple, Microsoft, Alphabet, Amazon.com. And Nvidia company. – It represents about a quarter of the index’s market value. Their profits are expected to jump 34% from the previous year on average, according to analyst estimates compiled by Bloomberg Intelligence.
Meanwhile, BlackRock. Strategists are adjusting their underweight approach to Treasuries, although that is not enough to send a buy signal as the continued rise in 10-year yields promises to provide volatility that could push the market up or down.
“We are turning longer-term Treasuries tactically neutral as markets price in higher interest rates for longer but remain strategically underweight,” the asset manager said in its weekly research note published on Monday. “US 10-year bond yields at 16-year highs show they have adjusted a lot – but we don’t think the process is over.”
In economic news, a measure of factory activity in New York State contracted in October, reflecting declining demand. Philadelphia Fed President Patrick Harker reiterated comments he made last week asserting that the central bank can keep its benchmark interest rate steady as long as there is no sharp turn in economic data.
The European Central Bank is monitoring oil prices for any inflationary impact of the conflict between Israel and Hamas, European Central Bank President Christine Lagarde told euro zone finance ministers.
Most prominent companies
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Charles Schwab Corp. Interest rates rose as executives said the company’s cash sorting problems — where customers move money from the bank into higher-yielding products — were beginning to ease despite persistently high interest rates.
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Pfizer Inc.’s announcement was met with… It will cut $9 billion from annual sales guidance due to lower demand for Covid vaccines and pills, comforted by investors eager to understand the company’s post-pandemic growth strategy.
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lululemon athleisure stock rose on news that athleisure will join the S&P 500, putting the stock on track for a seventh straight session of gains and extending its outperformance this year.
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Apple’s new iPhone 15 is selling much worse in China than its predecessor, according to separate studies, reflecting stubbornly weak consumption as well as the rise of rivals like Huawei Technologies Co. Stocks underperformed.
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Ford Motor Company called on the United Auto Workers to end its strike that has lasted more than a month, warning that if the work stoppage continues it will harm local communities and the broader American economy.
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American pharmacy chain Rite Aid Corp. It has filed for bankruptcy in an attempt to close unprofitable stores, address lawsuits over its role in the opioid epidemic and recast a debt load of about $4 billion.
Main events this week:
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Chinese President Xi Jinping will host world leaders at the Belt and Road Initiative Forum from Tuesday to Wednesday, and Russian President Vladimir Putin is expected to attend.
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Joint policy and research conference between the European Central Bank and the International Monetary Fund, Tuesday
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German ZEW survey forecast, Tuesday
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UK Unemployment Claims, Unemployment, Tuesday
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US Retail Sales, Business Inventories, Industrial Production, Tuesday
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Goldman Sachs, Bank of America earnings, Tuesday
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New York Fed President John Williams will moderate the discussion, while Richmond Fed President Tom Barkin will speak at a separate event on Tuesday.
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Reserve Bank of Australia Governor Michelle Bullock speaks on Wednesday
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China GDP, Retail Sales, Industrial Production, Wednesday
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UK Consumer Price Index, Wednesday
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Eurozone consumer price index, Wednesday
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Morgan Stanley, Netflix and Tesla earnings Wednesday
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The Federal Reserve releases its “Beige Book” economic survey on Wednesday
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Philadelphia Fed President Patrick Harker and New York Fed President John Williams spoke on separate occasions on Wednesday
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Unemployment in Australia, Thursday
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Japanese Trade, Thursday
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Real estate prices in China today, Thursday
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US Initial Jobless Claims, Existing Home Sales, leading indicator, Thursday
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Fed Chairman Jerome Powell, Chicago Fed President Austan Goolsbee, Atlanta Fed President Raphael Bostic, Philadelphia Fed President Patrick Harker, and Dallas Fed President Lori Logan speak at various events Thursday.
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Japanese Consumer Price Index, Friday
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Interest rates on Chinese loans, Friday
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Philadelphia Federal Reserve Bank President Patrick Harker speaks on Friday
Some key movements in the markets:
Stores
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The S&P 500 rose 1.1% as of 3:07 PM New York time
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The Nasdaq 100 rose 1.2%.
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The Dow Jones Industrial Average rose 1%.
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The MSCI World Index rose 0.7%.
Currencies
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The Bloomberg Dollar Spot Index fell 0.3%.
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The euro rose 0.4 percent to $1.0553
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The British pound rose 0.6 percent to $1.2211
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There was little change in the Japanese yen at 149.53 to the dollar
Digital currencies
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Bitcoin rose 5.2% to $28,629.45
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Ether rose 1.9% to $1,594.4
Bonds
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The yield on the 10-year Treasury note rose 10 basis points to 4.71%.
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The yield on German 10-year bonds rose five basis points to 2.79%.
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The yield on British 10-year bonds rose nine basis points to 4.48%.
Goods
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West Texas Intermediate crude fell 1.2% to $86.64 a barrel
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Gold futures fell 0.5% to $1,931.70 an ounce.
This story was produced with assistance from Bloomberg Automation.
– With the help of Farah Al-Bahrawi.
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