The Dow Jones Industrial Average finished higher on Monday, as investors purchased early-day weakness after assessing a more cautious tone from Federal Reserve officials and escalating geopolitical tensions amid worries of an Israel-Hamas clash.
The Dow Jones Industrial Average gained 0.5%, or 197 points, the Nasdaq gained 0.3%, and the S& P 500 gained 0.6%.
Federal Reserve policymakers express reluctance to raise interest rates further
Fed officials, including Fed Vice Chair Philip Jefferson and Dallas Fed president Lorie Logan, expressed skepticism about the need for additional rate hikes, implying that the recent rise in Treasury yields, which has tightened financial conditions, would aid the Fed in its fight against inflation.
“We are in a sensitive period of risk management, where we must balance the risk of not tightening enough against the risk of policy being too restrictive,” Jefferson added, concerned that tightening too many risks would cause the economy to decline more than expected.
Meanwhile, Logan stated that “there may be less need to raise the fed funds rate” as long-term interest rates rise.
The escalation of the Israel-Hamas conflict adds to the worries; defense stocks rise
Following Hamas’ surprise attack on Israel and Israel’s subsequent declaration of war, geopolitical tensions in the Middle East dominated investor attention and temporarily dampened their appetite for risk.
The escalation of the dispute comes as the United States appears to be getting closer to brokering a deal that would normalize relations between Saudi Arabia and Israel, perhaps clearing the way for the end of the Arab-Israeli conflict.
“The Saudi leadership has insisted on Israel making significant concessions to the Palestinians as part of any normalization agreement, and given what has happened, it is difficult to imagine a government that is now on the verge of war agreeing to such terms, according to a note from the Royal Bank of Canada.
Defense companies like Lockheed Martin Corporation (NYSE: LMT), L3Harris Technologies Inc (NYSE: LHX), and Northrop Grumman Corporation (NYSE: NOC) have risen in response to anticipation that defense expenditure will increase if the conflict continues.
Chevron leads the way higher in energy equities as Israel orders the closure of an oil field
Chevron Corp (NYSE: CVX) gained more than 3% after the Israeli government ordered the oil major to halt natural gas production at the Tamar facility in the Mediterranean due to safety concerns.
escalating oil prices on worries of disruptions in the oil-rich Middle East amid escalating geopolitical tensions aided the rise in energy equities.
The oil sector’s top gainers included Halliburton Company (NYSE: HAL), Marathon Oil Corporation (NYSE: MRO), and Hess Corporation (NYSE: HES).
U.S. airlines have been grounded after the cancellation of Israel flights
Delta Air Lines Inc (NYSE: DAL), United Airlines Holdings Inc (NASDAQ: UAL), and American Airlines Group (NASDAQ: AAL) all experienced significant losses after canceling flights to Israel.
Tesla suffers from a sales dip in China, while rival BYD thrives
Tesla (NASDAQ: TSLA) closed slightly down as the electric car maker’s hold on China looks to be slipping, according to statistics from the China Passenger Car Association, which indicated that sales in China fell 10.9% in September compared to the same month a year ago.
Meanwhile, BYD Co (SZ:002594) Ltd-H (OTC: BYDDF), a Chinese EV producer and Tesla competitor, saw its sales surge 42.8% to 286,903 last month, according to the statistics.
