Markets Update: Tensions and Economic Indicators

Headlines:

• Stocks Improve as Oil Drops Below $90
• US Urges Israel to Postpone Gaza Invasion for Hostage Release
• Federal Reserve’s Mester Suggests Rate Tightening May Soon Conclude

Key Points:

• Middle East Tensions: Diplomatic initiatives aim to deescalate the Israel-Hamas conflict and avert a broader Middle East war. Pressure is being applied on Israel by the US and Europe to halt a Gaza ground assault, facilitating hostage negotiations. Recently, Hamas released two Americans they had held for roughly two weeks.
• Market Movements: Despite global uncertainties, including Middle East unrest and rising Treasury yields, the S&P 500 is showing resilience, though it has faced four consecutive declines. The market responded to geopolitical stresses, evidenced by the synchrony in movements of many S&P 500 companies. Furthermore, the VIX indicates higher short-term volatility expectations.
• Economic Indicators: Oil prices eased, with West Texas Intermediate crude hovering near $89. Despite weekly gains, Treasury yields have moderated, with the 10-year rate approaching 5%. The dollar remained volatile.
• Federal Reserve: Loretta Mester, President of the Federal Reserve Bank of Cleveland, intimated that the Fed’s tightening phase might be nearing its conclusion if the economy progresses as forecasted.
• Corporate Earnings: With 86 S&P 500 companies reporting, 74% surpassed profit predictions. This figure contrasts with the 78% success rate from the previous year. The focus has largely been on the earnings but global issues and Treasury yields have dominated market reactions. 

Corporate Highlights:

• US airline stocks face a downturn due to rising oil costs.
• Regions Financial Corp. (RF) expects reduced net interest income.
• American Express (AXP) noted quicker-than-anticipated declines in card usage for Q3.
• SLB saw a dip in North American sales – the first since early 2021.
• Solar stocks dipped, with SolarEdge Technologies (SEDG) predicting lower Q3 revenue.
• Automaker negotiations with United Auto Workers have intensified, as reported by inside sources.

Market Movements:

• Stocks: S&P 500 down by 0.6%; Nasdaq 100 by 0.8%; Dow Jones by 0.4%; MSCI World Index by 0.7%.
• Currencies: Bloomberg Dollar Index down 0.1%; Euro up 0.1% ($1.0594); British pound up 0.1% ($1.2160); Japanese yen steady at 149.86 per dollar.
• Cryptos: Bitcoin up 2.8% ($29,540.13); Ether up 2.7% ($1,609.62).
• Bonds: 10-year Treasuries yield dropped to 4.92%; Germany’s 10-year to 2.89%; Britain’s 10-year to 4.65%.
• Commodities: WTI crude down 0.4% ($89.03); Gold up 0.6% ($1,993.30).