Market Snapshot: Dow Jones rises over 200 points as investors await earnings, shake off Israel-Hamas war worries

What’s driving markets

A flight to safety inspired by uncertainty around the situation in the Middle East appeared to see some unwinding early Monday, with stocks rising and traditional havens, including gold, the U.S. dollar and Treasurys losing ground. A fall in Treasury prices meant a renewed rise in yields.

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,
-0.46%
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

Earnings season moves into full swing this week, 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.

Oil futures were steady early Monday after jumping at the end of last week as traders feared an escalation could interrupt supplies.

Susannah Streeter, head of money and markets at Hargreaves Lansdown noted that the war between Israel and Hamas was just another geopolitical fracture that, alongside the Ukraine/Russia war and continued tensions between the U.S. and China, could damage global economic growth.

“Warnings from JPMorgan Chase CEO, Jamie Dimon, that the world may be facing the most dangerous time in decades overshadowed the bank’s buoyant earnings report on Friday,” Streeter said.

More of Wall Street’s big banks will report results on Tuesday, with Bank of America
BAC,
+1.07%,
Goldman Sachs
GS,
+2.02%
and BNY Mellon
BK,
+1.88%
stepping up to the plate. Big tech results will start with Netflix
NFLX,
+1.01%
and Tesla
TSLA,
+0.38%
on Wednesday.

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

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

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.

Philadelphia Fed President Patrick Harker is due to speak at 10:30 a.m. Eastern and again at 4:30 p.m.

The benchmark 10-year Treasury yield
BX:TMUBMUSD10Y
was up nearly 6 basis points to 4.685% as traders remained wary that recent sturdy U.S. economic data and signs of sticky inflation will keep interest rates higher for longer.

Tom Lee, head of research at Fundstrat, said it was understandable that investors are wary given the geopolitical environment, but he thinks equities will take supportive cues from three sources.

“First, the direction of yields and it seems like the U.S. 10-year yield is drifting lower. Lower is constructive for stocks,” Lee said in a note published over the weekend.

The second factor is that expectations for a Fed rate hike are likely to fall from the current 30% to zero as fresh data comes in. “While many fear a resurgence of inflation, Fedspeak shows that the rise in longer term yields is accomplishing the tightening the Fed wants,” he said.

The third point is that a positive third-quarter earnings season is likely to cause a flood of buying by investment managers who, according to Goldman Sachs, are short $47 billion of U.S. equities. “As GS points out, there is an asymmetry and an upside tape will bring in buyers,” said Lee.

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.

• Ford Motor Co.
  F,
  +0.80%
  is recalling 238,364 Explorers, as the rear axle horizontal mounting bolt may fracture, causing the drive shaft to disconnect. Shares were little changed in premarket activity.