There was a measure of relief at the end of Friday’s session that the stock market bounced back from early losses following the release of the September employment report and scored some healthy gains that enabled the S&P 500 to avoid a fifth consecutive losing week. That sense of relief, however, quickly turned back into a feeling of angst when it was learned over the weekend that Hamas launched a surprise attack on Israel, killing hundreds, and driving Israel to declare war on Hamas.<\/p>\n\n\n\n
This week begins then with a new level of geopolitical uncertainty that is keeping buyers sidelined for the time being. Objectively, though, the fallout seen so far in the capital markets has been more modest than one might think given the gravity of the Israel-Hamas situation that has prompted the U.S. to send the USS Gerald R. Ford<\/em> Carrier Strike Group to the Eastern Mediterranean.<\/p>\n\n\n\n Currently, the S&P 500 futures are down 30 points and are trading 0.7% below fair value, the Nasdaq 100 futures are down 122 points and are trading 0.8% below fair value, and the Dow Jones Industrial Average futures are down 217 points and are trading 0.7% below fair value.<\/p>\n\n\n\n In turn, oil prices have risen, but so far are not moving in an extreme manner. WTI crude futures are up 3.9% to $86.05\/bbl and Brent crude futures are up 3.8% to $87.78\/bbl.<\/p>\n\n\n\n The Treasury market is closed today for the Columbus Day holiday, which is also referred to as Indigenous People’s Day, but other sovereign bond markets that are open haven’t seen a massive flight to safety. The 10-yr German bund yield, for instance, is down just four basis points to 2.84% and the UK’s 10-yr gilt yield is down only three basis points to 4.55%.<\/p>\n\n\n\n The overarching concern is that the Israel-Hamas War evolves into a wider regional conflict. There have been press reports that suggest Hamas had backing from Iran for the surprise attack, but thus far Israel’s retaliatory focus has been on Hamas and Gaza.<\/p>\n\n\n\n This is all happening at a time when the U.S. House of Representatives lacks a Speaker following last week’s stunning ouster of former Speaker Kevin McCarthy. The House is unable to conduct any business, other than the business of electing a new Speaker, until a new Speaker is elected — and there is heightened uncertainty about that process, both in terms of who will be elected and how long it will take to elect the new Speaker.<\/p>\n\n\n\n That’s the backdrop entering the week, which will also feature the release of the September Consumer Price Index on Thursday, the start of the third quarter earnings reporting season, and the lingering angst about the path of interest rates.<\/p>\n\n\n\n In brief, the equity futures market might not look as bad as one would expect, but it still doesn’t look good.<\/p>\n\n\n\n The stock market will start today’s session on a lower note, having to deal with another known unknown.<\/p>\n\n\n\n —<\/p>\n\n\n\n