U.S. Equities Rebound on Fed Comments
In a turnaround, U.S. equities bounced back from earlier losses on Monday, October 9, 2023. The S&P 500 index closed 0.6% higher following remarks from Federal Reserve officials. These comments hinted that the recent surge in Treasury yields might reduce the likelihood of further interest rate hikes aimed at curbing inflation.
Middle East Conflict Spurs Oil Futures
Simultaneously, concerns about escalating conflict in the Middle East emerged as fighting erupted between Hamas and Israel over the weekend. This geopolitical tension led to a notable surge in crude oil futures, with prices rising by more than 4%. Investors, seeking safety, also drove up gold prices. It’s worth noting that the U.S. bond market remained closed due to a holiday.
Defense and Oil Stocks Surge
Amid these developments, defense stocks witnessed significant gains. Northrop Grumman (NOC) saw its shares surge by 11.5%, while L3Harris Technologies (LXH) and Lockheed Martin (LOC) recorded increases of 10% and 9%, respectively. The surge in oil prices also had a positive impact on oil industry stocks, with Chevron (CVX) experiencing an almost 3% rise.
Airlines and Cruise Lines Face Headwinds
Conversely, concerns about reduced travel demand and higher fuel prices led to declines in the shares of airlines and cruise lines. United Airlines Holdings (UAL) shares dipped by about 5%, while American Airlines (AAL) and Delta Air Lines (DAL) both saw 4% drops. Cruise line stocks also faced challenges, with Carnival Corporation (CCL) shares down by over 4%.
Solar and Tesla Face Challenges
Additionally, shares of SolarEdge Technologies (SEDG) fell by 4%, and First Solar (FSLR) shares declined by 3%. This decline followed OPEC’s prediction that oil demand would increase more than previously anticipated, despite the growing adoption of “green” energy sources. Meanwhile, Tesla (TSLA) shares experienced a 0.3% drop after a report revealed a 10.9% year-over-year decrease in its China sales for the previous month.