Dow Jones jumps nearly 300 points as investors kick off jam-packed week

What’s driving markets

Stock buyers returned after the S&P 500 on Friday joined the Nasdaq Composite in correction territory having shed more than 10% from its recent high at the end of July to close at its lowest since May.

See: S&P 500 index enters a correction. Here’s what it means for future performance.

Relief that the Israel-Hamas war had not drawn in other combatants in the region over the weekend was helping sentiment, according to analysts.

Even though the war has entered a more dangerous second phase, “it hasn’t been followed up by significant risk aversion in the markets,” Raffi Boyadjian, lead investment analyst at XM, said in a note.

“It’s likely that some of the risks have already been priced in but perhaps there’s also a perception that Israel is proceeding with its military objectives somewhat cautiously, thereby lowering the likelihood of a wider regional conflict,” he said.

Equity benchmarks also have been hit of late partly because of some poorly received third-quarter earnings — notably from big technology firms that had led the broader market higher for much of the year. The next tech behemoth to present its numbers will be Apple Inc. AAPL after the market closes on Thursday.

Earnings Watch: Big Tech earnings have been strong, but Apple is about to answer the thousand-dollar question

Earnings season remains in full swing, with investors digesting results from corporate heavyweights early Monday.

Another factor pressuring equities over the past several weeks was the lurch higher in benchmark bond yields
BX:TMUBMUSD10Y
to 16-year highs above 5% on concerns a robust economy will force the Federal Reserve to keep interest rates high for longer and, amid fears additional Treasury issuance, will push down prices.

Both of those issues will be addressed Wednesday, when the Treasury will publish its quarterly refunding announcement in the morning, followed in the afternoon by the Fed’s latest interest rate decision. The Treasury on Monday afternoon will announce its borrowing estimates for the fourth quarter of this year and first quarter of 2024.

Check out: How stock-market investors can ride out a ‘fear cycle’ as S&P 500, Nasdaq fall into correction

Fed Chair Jerome Powell and fellow policy makers are expected to leave borrowing costs unchanged at a range of 5.25% to 5.5%, so investors will be eager to hear if he gives any clues about Fed trajectory in coming months.

The nonfarm payrolls jobs report on Friday will doubtless play an important role in the Fed’s future deliberations.

Meanwhile, The Bank of England is also expected to stand pat on Thursday, while the Bank of Japan on Tuesday has the potential to rattle markets should it make comments on relaxing its yield curve control policy.

Technical analysts noted that the S&P 500 sits below its 200-day moving average, suggesting it is in a negative trend. But Tom Lee, head of research at Fundstrat reckons that some softer data will help constrain bond yields and support stocks.

“I think there is enough incoming data this week along with the negative positioning for stocks to finally break this doom loop. We may have to wait until month end (tax-loss selling this month). And our bigger message is to not get too negative,” said Lee.

Companies in focus

• Shares of Dow component McDonald’s Corp.
  MCD,
  +1.26%
  rose 0.4%, after the fast-food restaurant giant reported third-quarter results that rose above expectations, with price increases helping boost U.S. results.

• SoFi Technologies Inc.
  SOFI,
  +4.00%
  on Monday posted a large revenue beat for the latest quarter and gave an upbeat outlook. Shares rose nearly 7%.