Monday’s gains for Big Tech helped offset drops for stocks in the oil-and-gas industry, which were hurt by the sinking price of oil. Exxon Mobil fell 0.5 per cent and ConocoPhillips fell 1.2 per cent.
A barrel of benchmark US crude fell 6.1 per cent, and Brent crude, the international standard, slid 6.1 per cent. It was the first trading for them since Israel attacked Iranian military targets on Saturday, in retaliation for an earlier barrage of ballistic missiles. Israel’s attack was more restrained than some investors had feared it could be, and it raised hopes that a worst-case scenario may be avoided.
Beyond the violence that is taking a human toll, the worry in financial markets is that an escalating war in the Middle East could cut off the flow of crude from Iran, which is a major oil producer. Such worries had sent the price of Brent crude up to nearly $US81 per barrel in early October, despite signals that plenty of oil is available for the global economy. It’s since fallen back below $US72.
Financial markets are also dealing with the volatility that typically surrounds a US presidential election, with Election Day fast approaching in two Tuesdays. Markets have historically been shaky heading into an election, only to calm afterward regardless of which party wins.
The trend affects both the stock and the bond markets. In the bond market, Treasury yields were ticking higher to tack more gains onto their sharp rise for the month so far.
The yield on the 10-year Treasury rose to 4.28 per cent from 4.24 per cent late Friday. That’s well above the roughly 3.70 per cent level where it was near the start of October.
Yields have climbed as report after report has shown the US economy remains stronger than expected. That’s good news for Wall Street, because it bolsters hopes the economy can escape from the worst inflation in generations without the painful recession that many had worried was inevitable.
But it’s also forcing traders to ratchet back forecasts for how deeply the Federal Reserve will cut interest rates, now that it’s just as focused on keeping the economy humming as getting inflation lower. With bets diminishing on how much the Fed will ultimately cut rates, Treasury yields have also been given back some of their earlier declines.
That means the US jobs report on the schedule for Friday could end up being the market’s main event, even bigger than the Big Tech profit reports. Investors want to see more evidence of solid hiring to keep alive the perfect-landing hopes for the economy.
Such data has supplanted inflation reports, which used to be the most important for Wall Street every month but have waned as inflation seems to be heading toward the Fed’s target of 2 per cent.
Yields have also climbed as investors have seen former President Donald Trump’s chances of re-election improving. Economists say a Trump win could help push inflation higher in the long term, and worsening inflation could push the Fed to hike interest rates.
Trump Media & Technology Group, the company that tends to move more with Trump’s re-election odds than on its own profit prospects, jumped 21.6 per cent Monday to $US47.36. The parent company of Trump’s Truth Social platform has been rallying since hitting a bottom of roughly $US12 in late September, though it’s still well below its perch above $US60 reached in March.
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Robinhood Markets rose 3 per cent after it said it would begin allowing some of its customers to trade contracts based on whether they think either Trump or Vice President Kamala Harris will win the 2024 election.
Delta Air Lines was another winner and rose 2.3 per cent after suing CrowdStrike, claiming the cybersecurity company had cut corners and caused a worldwide technology outage that led to thousands of cancelled flight in July.
All told, the S&P 500 rose 15.40 points to 5,823.52. The Dow added 273.17 points to close at 42,387.57. The Nasdaq rose 48.58 points to 18,567.19.
In stock markets abroad, Japan’s Nikkei 225 rose 1.8 per cent as the value of the Japanese yen sank after Japanese Prime Minister Shigeru Ishiba’ s ruling coalition lost a majority in the 465-seat lower house in a key parliamentary election Sunday.
AP, Bloomberg
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