U.S. Stock Markets Surge on Earnings Optimism Amidst Middle East Conflict

While the Israeli-Gaza conflict continued to unfold, market participants seemed more inclined to take on risk.

On Monday, major U.S. stock indexes surged, driven by optimism surrounding the start of earnings season.

Additionally, transportation and small-cap stocks saw substantial gains, reflecting a risk-on sentiment among investors. Safe-haven assets like gold experienced a decline in prices amid these positive developments.

While the Israeli-Gaza conflict continued to unfold, market participants seemed more inclined to take on risk.

The situation in Gaza has been grim, resulting in thousands of casualties, including women and children, due to a lack of progress in cease-fire negotiations.

The Cboe Volatility Index (VIX) decreased, and the Dow Jones Industrial Average recorded its most significant daily percentage gain in about a month.

The Dow Jones Transportation Average also saw a substantial increase of 1.9%, marking its largest one-day percentage gain since late July, while the Russell 2000 small-cap index rose by 1.6%.

Among the S&P 500 sectors, consumer discretionary stocks led the gains, although all sectors posted higher values for the day. Charles Schwab shares surged by 4.7% after the brokerage reported a smaller-than-expected drop in quarterly profit.

Investors were eagerly awaiting quarterly results from prominent banks such as Goldman Sachs, Bank of America, and Morgan Stanley, as well as pharmaceutical giant Johnson & Johnson, electric vehicle maker Tesla, and video-streaming pioneer Netflix, all scheduled for release during the week.

According to LSEG data from Friday, third-quarter earnings for S&P 500 companies were estimated to have increased by 2.2% year-over-year, up from an estimated increase of 1.3% just a week earlier.

Quincy Krosby, the Chief Global Strategist at LPL Financial in Charlotte, North Carolina, noted, “At least for today, this is a market that sees a stronger earnings season, a stronger week in terms of earnings.”

She also emphasized the importance of global leaders’ efforts to contain the Middle East conflict.

In terms of market performance, the Dow Jones Industrial Average rose by 314.25 points (0.93%) to reach 33,984.54, the S&P 500 gained 45.85 points (1.06%) to close at 4,373.63, and the Nasdaq Composite added 160.75 points (1.2%) to reach 13,567.98.

Furthermore, data indicated that the New York Fed’s General Business Conditions index, also known as the “Empire State index,” had turned negative.

Philadelphia Fed President Patrick Harker reiterated his belief that the U.S. central bank had likely completed its rate-hike cycle.

Lululemon Athletica’s shares surged to their highest level in nearly two years as the Canadian sportswear apparel maker was set to join the S&P 500 index, replacing Activision Blizzard. Lululemon’s shares closed up by 10.3%.

In terms of trading volume, U.S. exchanges witnessed 9.60 billion shares changing hands, slightly below the 10.38 billion average over the last 20 trading days.

Advancing issues outnumbered declining ones on the NYSE and Nasdaq, indicating a favorable ratio for advancers.

The S&P 500 registered 11 new 52-week highs and 6 new lows, while the Nasdaq Composite recorded 33 new highs and 206 new lows.