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U.S. stocks jumped on Monday as traders looked ahead to a barrage of corporate earnings reports this week and shrugged off rising Treasury yields and geopolitical tensions in the Middle East.

The Dow Jones Industrial Average traded 391 points higher, or 1.2%, in morning trading. The S&P 500 and Nasdaq Composite climbed 1.2% apiece.

Big names leading the Dow’s rally included Nike, Intel and Travelers, all up more than 2%. The upbeat sentiment lifted every S&P 500 sector, with technology, healthcare and financials among the top gainers.

The market’s focus is shifting to third-quarter earnings season, which heats up this week. Results from 11% of S&P 500 companies are expected, including reports from Johnson & Johnson, Bank of America, Netflix and Tesla.

Companies like Charles Schwab and JPMorgan Chase have already posted better-than-expected profits last week, helping lift sentiment. But many are bracing for unpredictable swings amid rising rates, sticky inflation and global conflicts.

“We expect bonds/equities to range-trade near term,” said Barclays strategist Ajay Rajadhyaksha. “Bond volatility and Middle East tensions are a drag on risky assets, but should be offset by earnings and dovish Fedspeak.”

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Oil Prices Waver on Middle East Unrest

Over the weekend, Israel ramped up warnings for Gaza residents to evacuate areas along the border as it prepares for a possible ground invasion. The U.S. Senate also vowed to quickly approve military aid for Israel battling Palestinian militants.

While the 10-year Treasury yield climbed nearly 7 basis points, oil prices dipped as traders analyzed the latest updates from the escalating conflict.

The market is coming off a mixed week, with the tech-heavy Nasdaq falling 0.2% while the Dow and S&P 500 managed slight gains. Some expect the tug-of-war to persist into year-end.

“Last week was clearly a shock reaction to the geopolitical surprise,” said Moneta Group CIO Aoifinn Devitt. “We’re normalizing the turmoil and getting back to fundamentals.”

Earnings Deluge Could Boost Stocks

With stock valuations lowered significantly this year, the upcoming earnings results will be crucial for gauging corporate health amid high inflation and rising rates.

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Companies likely increased prices to maintain strong profit margins. But higher costs may have started crimping consumer demand. Management commentary on 2023 forecasts will be vital.

JPMorgan CEO Jamie Dimon said last week that while the U.S. economy remains resilient now, significant headwinds like inflation, rising rates and the war in Ukraine may tip it into recession next year.

Still, stocks tend to rise during earnings season as solid reports outweigh disappointments. That trend could provide some lift after September’s dismal performance.

If more firms beat expectations as Schwab and JPMorgan did, that would reinforce hopes that corporate America is weathering the myriad storms. Stock pickers will be watching reactions to results closely.

Stay tuned as we analyze the key earnings reports and trends this week. Please subscribe to our newsletter for ongoing coverage of the markets and economy.

Icahn Blames ‘Rigged Market’ for Mall Short Bet Losses

Billionaire investor Carl Icahn placed a massive short position betting on struggling American malls in late 2019 via credit default swaps. But the trade has racked up $742 million in paper losses this year, according to the Wall Street Journal.

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Icahn blamed derivatives trades in “a rigged market for billions and billions of dollars” for his sour bet. But such trades carry inherent risks where small price differences can dramatically swing gains and losses.

Stocks to Watch

Among other stocks on the move Monday:

  • Cybersecurity firm Varonis Systems jumped over 5% after Morgan Stanley upgraded it to overweight, calling it a hidden winner from advances in AI.
  • Rite Aid sank 16% after the drugstore chain filed for Chapter 11 bankruptcy protection as sales wane. It secured $3.45 billion in new financing.
  • Pfizer slipped 1% after slashing its 2022 guidance by $9 billion due to slowing Covid product demand. But Jefferies upgraded it on an attractive long-term outlook.

For ongoing coverage of market movers, please bookmark our stocks to watch page. Stay tuned for more business and investing insights as earnings season kicks into high gear.

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