Wall Street advances as investors monitor Mideast conflict headlines

Wall Street’s major indexes closed higher on Monday, defying earlier declines, as investors absorbed the latest news about the conflict between Israel and Hamas. The Israeli military’s announcement of a total blockade of the Gaza Strip and the calling up of reservists raised concerns of a potential ground assault. However, hopes for a possible truce emerged later in the day when a senior Hamas official expressed openness to discussions with Israel.

Amidst the geopolitical tensions, energy stocks rallied, driving the broader market gains. The news of the conflict sparked an oil rally due to supply concerns, boosting the S&P energy sector, which ended up 3.5% and emerged as the biggest gainer among the S&P 500’s 11 major industry sectors.

While the conflict initially weighed on investor sentiment, more dovish comments from Federal Reserve officials helped reverse the earlier declines. The reassurance that recent gains in long-term U.S. Treasury yields might deter the Fed from further interest rate hikes eased concerns among equity investors.

Investors appeared to refocus on U.S. centric matters, particularly the economy and earnings. Chief Investment Officer at Huntington National Bank, John Augustine, highlighted the strength of the U.S. economy and the expected positive earnings reports coming out of a recession. These fundamental factors were deemed more powerful in the market than the geopolitical headlines or even the strong jobs report and concerns about the Fed.

The positive sentiment was reflected in the performance of various sectors. Defense companies experienced a rally, with the S&P 500 Aerospace & Defense index recording its biggest one-day percentage gain since November 2020. Notable gainers included Northrop Grumman and L3Harris Technologies.

However, the conflict did have some negative impact on certain industries. United Airlines, Delta Air Lines, and American Airlines suspended direct flights to Tel Aviv, causing their shares to decline over 4% each. Additionally, rising oil prices added pressure to the S&P 500 Passenger Airlines index, which lost 3.7%.

Traditional safe-haven assets, such as gold, remained in demand, climbing 1.6%. Nevertheless, the U.S. dollar index gave up earlier gains and ended down 0.18%.

Although the conflict between Israel and Hamas continues to unfold, investors are finding solace in the resilience of the U.S. economy and the positive earnings outlook. The market’s ability to reverse earlier declines demonstrates the power of strong fundamentals in navigating through geopolitical uncertainties.

Overall, Wall Street’s major indexes closed higher, driven by the rally in energy stocks and the reassurance provided by Federal Reserve officials. As the conflict evolves, investors will closely monitor the situation while keeping a keen eye on economic indicators and corporate earnings reports, which are expected to further support the market’s positive trajectory.