U.S. stocks rose Tuesday, boosted by declines in Treasury yields as Wall Street assessed the geopolitical risks from the Israel-Hamas war.
The Dow Jones Industrial Average gained 0.4%, or 118 points. The S&P 500 added 0.6%, while the Nasdaq Composite climbed about 0.7%, coming off of earlier gains.
The benchmark 10-year Treasury yield fell more than 12 basis points at 4.655%, as investors sought safe assets amid the conflict. Yields and prices move in opposite directions. The move reflected the first reaction to the Israel-Hamas conflict in the U.S. bond market, which was closed Monday for Columbus Day.
Oil prices also eased after rallying in the previous session, providing relief to investors. West Texas Intermediate and Brent futures were both down about 0.5% and 0.6%, respectively, on Tuesday.
The decline in yields gave stocks a lift, as Wall Street remains concerned over the recent quick rise in interest rates. Investors may also be looking past the geopolitical risks caused by the Israel-Hamas war, helped by Friday’s stronger-than-expected September payrolls report and optimism ahead of a slew of third-quarter earnings this week.
“I think that move lower in yields has supported equity markets broadly. It may also be bringing relief to markets that perhaps there is some sort of peak in this rapidly upward moving yield in the last few weeks,” said Mona Mahajan, Edward Jones senior investment strategist. “There’s the kind of hope building that perhaps we are at the end of the Fed tightening cycle, as well as the rising rates.”
Mahajan noted that investors are also anticipating inflation data due this week, with the producer price index due on Wednesday and consumer price index set to release Thursday.
To be sure, some investors, including Gratus Capital chief investment officer Todd Jones, are noting Tuesday’s rally as a consequence of markets having already priced in negative sentiment and being in an oversold condition.
“The inflation picture is still pretty, pretty bad,” Jones said, adding that he expects a flat fourth quarter even if earnings expectations for the third quarter reflect positive earnings growth.
Hamas’ attack against Israel marks the deadliest offensive in 50 years. The death toll from the ongoing violence between Israel and Hamas has passed 1,800, with over 1,000 killed and 2,700 injured in Israel and at least 830 people killed and 4,250 injured in Gaza, according to latest figures from Palestinian and Israeli health services. Hamas is a militant group that was designated a terrorist organization by the U.S. government in 1997, and has governed the Gaza Strip since 2007.
PepsiCo shares rose about 2% after the beverage and snack maker reported better-than-expected third-quarter results and raised its earnings outlook. Several energy and industrial names continued their stretch into the green on Tuesday, with Enphase Energy and Generac Holdings both trading above 5%.
Correction: This story has been updated to correctly reflect Mona Mahajan’s comment on how long bond yields have been rising.
Read the full article here