US close: Stocks rebound strongly as markets rise over 1%
US stocks rebounded strongly on Monday as investors hunted for bargains after the S&P 500 touched a five-month low ahead of a busy week for earnings, data and central bank action.
The S&P 500 finished 1.2% higher after falling 5% over the past 10 trading sessions to settle at 4,137.23 on Friday – its lowest close since late-May. The Dow rose 1.6% while the Nasdaq gained 1.2%.
Stocks have been under heavy selling pressure over recent weeks on the back of rising bond yields, Middle Eastern geopolitical uncertainty and mixed corporate earnings.
Conflict in Israel escalated over the weekend after government forces made a large-scale ground assault on Gaza, drawing condemnation from neighbouring countries. However, reports of military action being more cautious than initially predicted may have tempered the market's reaction to the news on Monday.
"The limited and incremental nature of the incursions thus far appears to be helping assuage concerns that the escalations might prompt another front opening on Israel’s northern border with Lebanon and Hezbollah," said analyst Michael Hewson from CMC Markets.
Rising hopes that the ground assault will not spread into wider regional conflict hit oil prices with West Texas Intermediate crude dropping 3.5% to $82.59 a barrel.
Back to the US, the economic data calendar for Monday was relatively light; though things will pick up in the coming days with the ADP employment report, ISM manufacturing data and non-farm payrolls figures – not to mention central bank policy decisions from the Federal Reserve, Bank of England and Bank of Japan.
"The market is currently pricing in a probability of over 90% that the Fed will keep interest rates unchanged. Therefore, the primary focus will shift to the messaging from the Fed, especially considering the mixed signals that have been coming from the central bank since the September meeting," said market expert Patrick Munnelly from Tickmill Group.
Meanwhile, this week is another busy one for corporate earnings, with McDonald's, SoFi Technologies and Western Digital reporting pre-market on Monday and Pinterest, VF Corporation and Transocean publishing results after markets close. Apple will also be in focus ahead of its results on Thursday.
McDonald's beats forecasts
Fast food titan McDonald's saw shares rise after the company surpassed analysts' estimates with its third-quarter results, helped by “strategic menu price increases". Adjusted earnings per share came in at $3.19, ahead of the the $3 forecast, while revenues were up 14% at $6.69bn, exceeding the $6.56bn prediction.
Broadcom and VMWare both finished higher despite the news that the tech companies' $70bn merger – originally scheduled for Monday – would be delayed, with Chinese regulators still yet to give their approval. Broadcom said it expects the deal to close "soon".
Meanwhile, sector giant Alphabet was rebounding after a post-results 10% plunge last week.