The markets rallied on Monday, with the Dow Jones climbing more than 250 points as easing oil prices provided a boost to investor sentiment. The S&P 500 and Nasdaq also edged higher, driven by anticipation around this week’s earnings reports from major tech companies like Alphabet, Microsoft, and Apple. Investor relief was further bolstered by a less severe geopolitical situation in the Middle East, with recent airstrikes avoiding critical oil and nuclear facilities in Iran. With the upcoming US presidential election and a Federal Reserve policy decision on the horizon, markets are closely monitoring economic indicators and corporate earnings for further insights on growth and inflation trends.
Key Takeaways:
- Dow Rises Over 250 Points: The Dow Jones Industrial Average surged 273.17 points, or 0.65%, to close at 42,387.57, supported by softening oil prices and a cooling geopolitical situation in the Middle East. Investors were lifted by the prospect of solid earnings from major tech companies, which could sustain recent market momentum.
- S&P 500 and Nasdaq Edge Higher: The S&P 500 rose by 0.27%, ending at 5,823.52, while the Nasdaq Composite gained 0.26% to close at 18,567.19. Investor enthusiasm was fuelled by the upcoming earnings reports from five of the “Magnificent Seven” tech giants, including Alphabet, Microsoft, Meta Platforms, Amazon, and Apple. Shares of Apple and Alphabet each climbed about 0.9%, underscoring the focus on whether these megacap firms can continue to meet high expectations and sustain their impressive valuations amid economic challenges.
- Oil Prices Post Steep Decline: US crude oil prices plunged 6.13% to settle at $67.38 per barrel, marking their largest single-day drop in over two years. International benchmark Brent crude also fell 6.09%, closing at $71.42 per barrel. This steep decline followed a weekend of airstrikes by Israel on Iranian military installations, which avoided oil infrastructure as feared. The oil market breathed a sigh of relief, as a direct hit on Iran’s oil facilities could have disrupted up to 4% of global supply, according to the US Energy Information Administration.
- European Markets Gain Despite Oil Weakness: European markets closed in positive territory on Monday, lifted by improved sentiment as investors assessed the geopolitical situation in the Middle East. The pan-European Stoxx 600 ended 0.47% higher after a volatile morning, while London’s FTSE 100 gained 36.78 points, or 0.45%, to close at 8,285.62. In France, the CAC 40 rose 0.8% to 7,557, recovering some losses from the previous week, with most major sectors contributing to the gains. Meanwhile, Germany’s DAX also edged up 0.35%. Dutch medical device giant Philips saw its shares plunge nearly 17% after cutting its full-year sales forecast due to weaker demand from China.
- Asian Markets See Mixed Performance Amid Political and Economic Shifts: Asian markets had a varied day as Japan’s Nikkei 225 surged 1.82% to close at 38,605.53, leading the gains in Asia, while South Korea’s Kospi rose 1.13%, and the Kosdaq advanced 1.8%. Japan’s rally was partly driven by a weakened yen, which slipped 0.64% to 153.28 against the dollar. The Japanese ruling Liberal Democratic Party (LDP) and its coalition partner lost their parliamentary majority, adding political uncertainty that some analysts believe could delay the Bank of Japan’s expected rate hikes. Meanwhile, Australia’s S&P/ASX 200 saw a modest rise of 0.12%. In China, the CSI 300 edged up 0.2% to 3,964.16, while Hong Kong’s Hang Seng index managed a 0.18% gain in its final hour. China’s economic landscape continues to pose challenges, as industrial profits dropped 27.1% year-over-year in September.
- Crypto Stocks Surge as Bitcoin Nears $70,000: Stocks connected to Bitcoin enjoyed strong gains as the cryptocurrency rallied close to the $70,000 level, building on momentum from previous attempts to break this mark. Coinbase, a major crypto exchange, rose 4%, while MicroStrategy, a major Bitcoin holder, advanced over 5%. Bitcoin mining companies Mara Holdings and Riot Platforms saw gains of 6% and 5%, respectively.
- 10-Year Treasury Yield Reaches Three-Month High: US Treasury yields continued to climb, with the 10-year yield increasing by 4 basis points to reach 4.274%, its highest point since July 2024. The 2-year Treasury yield also edged up by 3 basis points to 4.131%. Investors remain cautious as they await critical economic data later this week, including GDP and employment figures, which may influence the Federal Reserve’s policy decision on Nov. 7.
FX Today:
- EUR/USD Under Pressure Amid Dollar Resilience: EUR/USD continued to struggle, trading near 1.0814 as the dollar showed resilience. The pair remains under selling pressure, currently below key moving averages on the 4-hour chart, with the 50-period SMA around 1.0823 acting as immediate resistance. A sustained move below 1.0823 reinforces the bearish outlook for the euro, with further declines potentially targeting key support at 1.0750. Should the pair breach this level, aiming toward the psychological level of 1.0700. On the upside, any recovery would need a decisive move above the 50-period SMA to alter the near-term outlook.
- GBP/USD Holds Key Support Levels Amid Dollar Softness: GBP/USD is consolidating around 1.2972, finding some support in a relatively weak dollar environment. The pair remains below the 50-period SMA at 1.2986, suggesting limited upward momentum. However, the consolidation around this level indicates that buyers may be preparing to push higher, with a potential target of breaking above the 1.3000 psychological level. A failure to hold support around 1.2970 and 1.2900, however, could lead to renewed selling pressure, with the next support zone at 1.2850. Key resistance remains at 1.2986 and 1.3031, with a move above these levels needed for a more positive outlook.
- AUD/USD Remains Pressured as Downtrend Persists: AUD/USD is trading around 0.6583, reflecting ongoing bearish momentum. The pair is currently below the 50-period SMA at 0.6659, indicating a sustained downtrend. Key support is seen near 0.6550, a level that, if breached, could intensify selling pressure. A potential recovery would require the pair to break above the 50-period SMA at 0.6659, but without this, the downtrend is likely to continue. Resistance at 0.6700 marks a crucial level, while support near 0.6500 may provide further downside protection if the bearish trend persists.
- Gold Holds Strong Above Key Averages Amid Bullish Sentiment: Gold is trading at $2,742, maintaining a bullish bias above critical moving averages. The precious metal remains supported above the 200-period SMA at $2,649 on the 4-hour chart, reinforcing a positive outlook. Immediate resistance lies at $2,760, and a break above this level could pave the way for further gains. On the downside, key support is around the 50-period SMA at $2,723, with a stronger floor at the 200-period SMA. Unless Gold falls below these levels, it appears poised to continue its upward trajectory, driven by safe-haven demand amid global market uncertainties.
Market Movers:
- Occidental, Exxon, BP Decline as Oil Prices Drop: Shares of oil majors Occidental Petroleum, Exxon, and BP fell in response to a 6% drop in US crude prices after Israel’s recent airstrikes on Iran spared oil facilities. The sector faced downward pressure as Citi analysts noted that supply disruptions from the geopolitical tensions were less severe than anticipated.
- McDonald’s Up as Quarter Pounder Returns: McDonald’s shares gained 1% as the company announced the return of its Quarter Pounder burger, which had been pulled from menus following an E. coli outbreak. Approximately 900 locations will reintroduce the burger, excluding slivered onions—suspected to be the source of contamination. This comes ahead of McDonald’s quarterly earnings report, expected on Tuesday.
- Taiwan Semiconductor Falls on Shipment Halt: Taiwan Semiconductor Manufacturing Company (TSMC) dropped 4% after halting shipments to a China-based chip designer. The move follows US restrictions on technology sales to Huawei, which recently incorporated TSMC’s chip into its AI processor. The news heightened regulatory concerns around US-China technology trade.
- Nio Jumps on Upgrade: Chinese electric vehicle maker Nio surged 10% following an upgrade from Macquarie to “outperform” from “neutral.” Analyst Eugene Hsiao highlighted strong order volume for Nio’s Onvo L60 model, expecting accelerating sales in the current quarter. This optimism comes as Nio continues to expand its EV offerings in a highly competitive market.
- Nutanix Rallies on Analyst Upgrade: Nutanix, a cloud infrastructure provider, jumped 4% following an upgrade to “overweight” from “equal weight” by Morgan Stanley. Analyst Meta Marshall cited an attractive setup and anticipated market share gains from architectural changes, projecting growth over the next few years as Nutanix continues to innovate.
- Moderna Gains on Cancer Treatment Trial: Moderna advanced 3% after it, alongside Merck, announced the initiation of a phase 3 trial for a non-small cell lung cancer treatment. The collaboration bolstered investor confidence, with Merck shares also inching higher on the positive news.
- Aaon Surges on AI-Driven Demand Outlook: Aaon, a heating and cooling equipment manufacturer, surged 9% after Baird upgraded the stock to “outperform.” Analyst Timothy Wojs highlighted potential benefits from artificial intelligence, noting that increased computing power generates more heat, which could drive demand for Aaon’s liquid cooling systems.
As the week unfolds, market participants remain focused on a packed agenda of corporate earnings, economic data, and geopolitical developments. The Dow’s gain of over 250 points, supported by a dip in oil prices, sets a hopeful tone, while tech giants prepare to report results that could drive further momentum in the Nasdaq. With key indicators like the third-quarter GDP and October jobs report ahead, traders are gauging the economic resilience that might shape the Federal Reserve’s upcoming policy decision. Global markets reflect a mixed outlook, as Asian indices show strength amid Japan’s political shifts, and European markets manage gains despite Philips’ sharp drop. As investor sentiment stabilizes, the interplay of earnings and economic data will likely steer market direction leading up to the US presidential election and Fed policy announcement.