Stocks Rise Amid Efforts to Stifle Israel Conflict: Markets Wrap

(Bloomberg) — Stocks rose and bonds fell amid diplomatic efforts to prevent the Israel-Hamas war from expanding into a regional conflict. Oil edged lower, following last week’s rally.

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The S&P 500 halted a two-day slide, with traders also gearing up for a raft of earnings reports over the next few days. Treasury 10-year yields advanced 10 basis points to 4.71%. The dollar retreated against most of its developed-market counterparts. Bitcoin pared gains after surging as much as 10% as BlackRock said its application for an exchange-traded fund that invests directly in the cryptocurrency is still under review.

US President Joe Biden is considering a trip to Israel as part of a global diplomatic push to prevent the war from spreading in the Middle East. Efforts also saw US Secretary of State Antony Blinken return to Israel Monday, following talks with Arab officials, and German Chancellor Olaf Scholz prepare for a visit Tuesday.

“The developments in the Middle East continue to influence the direction of US rates,” said Ian Lyngen, head of US rates strategy at BMO Capital Markets. “Friday’s reluctance to go into the weekend with a short Treasury position was intuitively followed by this morning’s selloff. The price action doesn’t reflect an improvement in investors’ outlook for the Israeli conflict, rather the absence of a significant escalation.”

Aside from geopolitics, traders will also be focused on the upcoming third-quarter corporate results this week.

The outlook for earnings is weakening and could remain subdued, according to strategists from Morgan Stanley to JPMorgan Chase & Co.

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As the reporting season kicks off, Morgan Stanley’s Michael Wilson said earnings revisions breadth — referring to the number of stocks seeing upgrades versus downgrades — for the S&P 500 has fallen sharply over the past couple of weeks. Citigroup Inc.’s index of earnings revisions shows downgrades have outpaced upgrades for four straight weeks ahead of the reporting season. JPMorgan strategist Mislav Matejka expects this to continue.

Investors looking to earnings season for a dose of good news are hanging their hopes on a familiar group: Big Tech.

The five biggest companies in the S&P 500 — Apple Inc., Microsoft Corp., Alphabet Inc., Amazon.com Inc. and Nvidia Corp. — account for about a quarter of the benchmark’s market capitalization. Their earnings are projected to jump 34% from a year earlier on average, according to analyst estimates compiled by Bloomberg Intelligence.

In economic news, a measure of New York state factory activity contracted in October, reflecting a pullback in demand. Treasury Secretary Janet Yellen said higher interest rates may persist, while insisting the US economy is “in a good place.”

Corporate Highlights

• Apple Inc.’s new iPhone 15 is selling far 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.

• Charles Schwab Corp. said its net interest revenue sank 24% to $2.2 billion from the year prior as clients moved cash into higher-yielding products.

• Lululemon Athletica Inc. climbed after S&P Dow Jones Indices announced Friday the company would replace Activision Blizzard Inc. on the S&P 500.

• Pfizer Inc. cut its forecast for 2023 sales of its Covid vaccine and Paxlovid antiviral after the waning pandemic led the company to cut its overall annual guidance Friday.

• Novavax Inc. slumped after European Union regulators delayed a decision to approve the company’s updated Covid-19 vaccine.

• US pharmacy chain Rite Aid Corp. filed for bankruptcy in an effort to close unprofitable stores, address lawsuits over its role in the opioid pandemic and rework a debt load of roughly $4 billion.

• Manchester United Plc slumped on news the Qatari group was stepping back from a potential takeover.

• Lockheed Martin Corp. continues to produce F-35 jets with flaws discovered after the fighter jets are delivered to US military units, according to the Pentagon’s contracts management agency.

Key events this week:

• Chinese President Xi Jinping hosts world leaders at the Belt and Road Initiative forum in Beijing, with Russian President Vladimir Putin expected to attend, Tuesday

• Joint European Central Bank/IMF policy and research conference, Tuesday

• Germany ZEW survey expectations, Tuesday

• UK jobless claims, unemployment, Tuesday

• US retail sales, business inventories, industrial production, Tuesday

• Goldman Sachs, Bank of America earnings, Tuesday

• New York Fed President John Williams moderates discussion, while Richmond Fed President Tom Barkin speaks at a separate event, Tuesday

• Reserve Bank of Australia Governor Michele Bullock speaks, Wednesday

• China GDP, retail sales, industrial production, Wednesday

• UK CPI, Wednesday

• Eurozone CPI, Wednesday

• Morgan Stanley, Netflix, Tesla earnings, Wednesday

• Federal Reserve issues Beige Book economic survey, Wednesday

• Philadelphia Fed President Patrick Harker and New York Fed President John Williams speak at separate events, Wednesday

• Australia unemployment, Thursday

• Japan trade, Thursday

• China property prices, Thursday

• US initial jobless claims, existing home sales, leading index, Thursday

• Federal Reserve Chair Jerome Powell, Chicago Fed President Austan Goolsbee, Atlanta Fed President Raphael Bostic, Philadelphia Fed President Patrick Harker, Dallas Fed President Lorie Logan speak at different events, Thursday

• Japan CPI, Friday

• China loan prime rates, Friday

• President Joe Biden hosts the European Union’s Ursula von der Leyen in Washington, Friday

• Philadelphia Fed President Patrick Harker speaks, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.6% as of 10 a.m. New York time

• The Nasdaq 100 rose 0.8%

• The Dow Jones Industrial Average rose 0.7%

• The Stoxx Europe 600 rose 0.2%

• The MSCI World index rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro rose 0.2% to $1.0530

• The British pound rose 0.2% to $1.2162

• The Japanese yen fell 0.1% to 149.73 per dollar

Cryptocurrencies

• Bitcoin rose 3.1% to $28,039.75

• Ether rose 1% to $1,580.83

Bonds

• The yield on 10-year Treasuries advanced 10 basis points to 4.71%

• Germany’s 10-year yield advanced six basis points to 2.79%

• Britain’s 10-year yield advanced nine basis points to 4.47%

Commodities

• West Texas Intermediate crude fell 0.7% to $87.05 a barrel

• Gold futures fell 0.6% to $1,930.60 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Farah Elbahrawy.

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