U.S. stocks started the week on a positive note, as various market indicators showed significant gains. The Dow Jones Industrial Average (DJIA) increased by 292 points or 0.9%, reaching 32,709. The S&P 500 (SPX) was up 45 points or 1.1%, closing at 4,162, and the Nasdaq Composite (COMP) gained 194 points or 1.5%, with a closing value of 12,838.
Last week, the Dow experienced a 2.1% decrease, marking its lowest point since March 28. The S&P 500 saw a 2.5% weekly drop, closing at its lowest since May 24, and the Nasdaq Composite declined by 2.6% over the same period.
Several factors were influencing the market. Investors returned to stocks as the S&P 500 and Nasdaq Composite had recently entered correction territory, with more than a 10% drop from their July highs to their lowest levels since May. Additionally, the lack of escalation in the Israel-Hamas conflict over the weekend provided relief to market sentiment.
Despite entering a more precarious phase, the conflict did not lead to significant risk aversion in the markets, partially due to the perception that Israel was proceeding cautiously in its military objectives, reducing the likelihood of a broader regional conflict.
Poorly received third-quarter earnings reports, particularly from prominent technology companies, had also contributed to the recent pressure on equity benchmarks. Apple Inc. is among the tech giants set to release its earnings after the market closes on Thursday.
Earnings season remained in full swing, with investors closely monitoring results from major corporations. In recent weeks, rising benchmark bond yields had added pressure to equities, reaching 16-year highs above 5%. This increase in yields raised concerns about the Federal Reserve's potential actions in response to a robust economy and the impact on interest rates and Treasury prices.
These concerns are set to be addressed on Wednesday when the Treasury publishes its quarterly refunding announcement in the morning, followed by the Fed's latest interest rate decision in the afternoon. It is widely expected that the Fed will keep borrowing costs unchanged in the range of 5.25% to 5.5%. Investors will be keen to hear any clues from Fed Chair Jerome Powell about the future trajectory.
The nonfarm payrolls jobs report on Friday will also play a crucial role in the Fed's future decisions. Meanwhile, the Bank of England is expected to maintain its current stance on Thursday, while the Bank of Japan's comments on relaxing its yield curve control policy on Tuesday could potentially impact markets.
Technical analysts have noted that the S&P 500 is below its 200-day moving average, suggesting a negative trend. However, some analysts, like Tom Lee from Fundstrat, believe that incoming data and negative positioning for stocks could lead to a more positive outlook, potentially breaking the current negative trend.
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