Early on Monday, there were cautious increases in U.S. stock futures due to concerns about tensions in the Middle East and the rise in Treasury yields.
How are stock-index futures trading
- The S&P 500 futures, specifically the ES00, increased by 9 points or 0.2%, reaching 4365.
- The Dow Jones Industrial Average futures, with a rise of 0.37% or 103 points, increased by 0.3% to reach 33,929.
- The Nasdaq 100 futures, ticker symbol NQ00, showed an increase of 15 points or 0.1%, reaching a total of 15136.
The Dow Jones Industrial Average (DJIA) increased by 39 points, equivalent to a 0.12% rise, reaching 33670 on Friday. Conversely, the S&P 500 (SPX) experienced a decrease of 22 points, equivalent to a 0.5% decline, landing at 4328. Additionally, the Nasdaq Composite (COMP) saw a drop of 167 points, equivalent to a 1.23% decrease, reaching 13407.
What’s driving markets
At the beginning of the week, equity traders are feeling hesitant due to various factors, such as tensions in the Middle East, oil prices rising above $90 per barrel, increased Treasury yields, and caution surrounding the upcoming corporate earnings season for the third quarter.
Richard Hunter, the head of markets at Interactive Investor, stated that investors are becoming more cautious due to a higher number of factors to consider.
Susannah Streeter, who holds the position of overseeing money and markets at Hargreaves Lansdown, observed that the ongoing conflict between Israel and Hamas is merely one more instance of geopolitical division that, when combined with the warfare between Ukraine and Russia and the ongoing tensions between the United States and China, possesses the potential to harm worldwide economic advancement.
Streeter noted that Jamie Dimon, the CEO of JPMorgan Chase, has expressed concerns about the world possibly entering its most hazardous period in years, which took away attention from the bank’s positive earnings report on Friday.
On Tuesday, additional major banks on Wall Street, such as Bank of America, Goldman Sachs, and BNY Mellon, will release their financial results. The following day, Wednesday, there will be the announcement of earnings from notable tech companies like Netflix and Tesla.
Scheduled for release on Monday are the U.S. economic updates, which consist of the Empire State manufacturing survey for October at 8:30 a.m. EST.
Philadelphia Federal Reserve President Patrick Harker is scheduled to give a speech at 10:30 a.m. and another speech at 4:30 p.m.
The benchmark 10-year Treasury yield, identified as BX:TMUBMUSD10Y, increased by approximately 6 basis points to reach 4.685%. This rise in yield is a reflection of traders’ cautiousness due to recent strong economic data in the United States and indications of persistent inflation, which may result in interest rates remaining elevated for an extended period of time.
According to Tom Lee, who is the head of research at Fundstrat, it is reasonable for investors to be cautious due to the geopolitical conditions. However, he believes that three factors will provide positive indications for the stock market.
Lee stated in a written message over the weekend that the decrease in US 10-year yield suggests a positive trend for stocks.
The second factor is that the chances of a Fed rate increase are expected to decrease from 30% to zero as new data is received. “Although many are concerned about inflation making a comeback, statements from the Federal Reserve indicate that the increase in long-term interest rates is achieving the tightening that the Fed desires,” he explained.
The third point is that if there is a positive earning season in the third quarter, investment managers, who are currently lacking $47 billion worth of U.S. equities, are expected to buy in huge numbers. Lee mentioned that Goldman Sachs has observed this and believes that if the market goes up, it will attract more buyers.
