Dow Jones jumps nearly 400 points as investors await earnings, shake off Israel-Hamas war worries

What’s driving markets

Stocks were building on early gains, while traditional havens, including gold, the U.S. dollar and Treasurys lost ground. A fall in Treasury prices meant a renewed rise in yields.

The stock-market gains came “after a weekend that saw a lot of noise, but little sign that an Israeli incursion into Gaza was imminent, although it still seems likely that it will happen at some point,” Michael Hewson, chief market analyst at CMC Markets, said in a note.

Oil prices were also lower, after jumping Friday to their highest since the Hamas attack on Israel earlier this month. The U.S. benchmark
CL00,
-0.44%
was down 0.7% near $87.08 a barrel. Crude prices have remained below 2023 highs set in late September before the Hamas attack. Analysts said oil will remain a bellwether for other asset prices.

See: Oil prices in spotlight as Iran warns of escalation of Israel-Hamas war

“Third quarter earnings season should be solid given the resilience of the U.S. economy. The likely end of the earnings recession should be well received by markets, but, as always, guidance from company management teams will drive the market’s reaction,” Jeffrey Buchbinder, chief equity strategist at LPL Financial, said in a note.

Earnings Watch: Wall Street’s Q3 expectations have been all over the place. Now, a swing to profit growth is ‘likely’ — with a bigger rebound next year

More of Wall Street’s big banks will report results on Tuesday, with Bank of America
BAC,
+0.75%,
Goldman Sachs
GS,
+1.68%
and BNY Mellon
BK,
+1.54%
stepping up to the plate. Big tech results will start with Netflix
NFLX,
+1.01%
and Tesla
TSLA,
+0.35%
on Wednesday.

Read more: Banks beat expectations but some economic cracks form as caution abounds

But jitters around the prospect of a broader war in the Middle East were likely to remain at least a background concern, analysts and investors said.

“Will geopolitical issues become the predominant market narrative? Until Friday the Middle East was only a conversation having limited market impact,” Kent Engelke, chief economic strategist at Capitol Securities Management, said in a note.

“War is perhaps the most unquantified event of mankind. The unintended consequences are huge where even the most thought-out plans can go wrong at the onset,” he wrote.

Read: Israel-Gaza conflict threatens to reawaken U.S. inflation, investors worry

Israel continued to pound the Gaza Strip ahead of an expected ground invasion of the Hamas-controlled enclave by the Israeli military. The prospect of a ground incursion has drawn warnings from Iran, which in turn was warned by Western leaders and diplomats not to escalate the conflict.

The New York Fed’s Empire State business-conditions index, a gauge of manufacturing activity in the state, edged down 6.5 points in October to negative 4.6, the regional Fed bank said Monday. Economists had expected a negative 6 reading, according to a survey by The Wall Street Journal.

Any reading below zero indicates deteriorating conditions.

The benchmark 10-year Treasury yield
BX:TMUBMUSD10Y
was up roughly 7 basis points to 4.695% as traders remained wary that recent sturdy U.S. economic data and signs of sticky inflation will keep interest rates higher for longer.

Companies in focus

• Drugstore chain Rite Aid Corp. RAD, facing billions of dollars of debt related to opioid lawsuits, filed for bankruptcy Sunday. Shares were halted on the New York Stock Exchange.

• Pfizer Inc.
  PFE,
  +5.48%
  shares jumped more than 5% after executives outlined cost reductions first announced late Friday. The cost-cutting program, designed to deliver savings of at least $3.5 billion, “will touch all parts of the business and all regions,” Pfizer Chief Financial Officer Dave Denton said on a call with analysts.

• Shares of Lululemon Athletica Inc.
  LULU,
  +9.84%
  jumped more than 9% after index provider S&P Dow Jones Indices said the stock will join the S&P 500 on Wednesday.