S&P 500 Volatility Soars as Hamas Attacks Escalate

Early on Monday, U.S. stock futures faced a decline due to an escalation in violence in the Middle East, impacting investor sentiment.

Here’s a breakdown of how stock-index futures were performing:

• S&P 500 futures (ES00, -0.63%) experienced a 20-point drop, equivalent to a 0.5% decrease, settling at 4,322.
• Dow Jones Industrial Average futures (YM00, -0.51%) lost 128 points, or 0.7%, falling to 33,472.
• Nasdaq 100 futures (NQ00, -0.83%) decreased by 93 points, or 0.6%, to 15,019.

On the previous Friday, the Dow Jones Industrial Average (DJIA) recorded a gain of 288 points, or 0.87%, reaching 33,408. Similarly, the S&P 500 (SPX) saw an increase of 50 points, equivalent to a 1.18% rise, to 4,309. The Nasdaq Composite (COMP) gained 212 points, or 1.6%, reaching 13,431.

What’s Behind the Market Movement:

The global markets started the week with a risk-off sentiment as a result of Hamas’s attack on Israel, which raised concerns about the potential for a broader conflict.

Richard Hunter, head of markets at Interactive Investor, noted, “Such geopolitical tension typically has a negative impact on sentiment, with investors likely to be unsettled by the prospect of increased uncertainty.”

The price of Brent crude (BRN00, 3.41%), the global energy benchmark, surged nearly 4% due to concerns about potential disruptions in oil supplies from the Middle East.

Jim Reid, a strategist at Deutsche Bank, pointed out, “Geopolitical risk tends not to have a lasting impact on markets, but there are many secondary effects that could emerge in the weeks, months, and even years ahead as a result of developments over the weekend.”

While geopolitical concerns held the market’s attention, the upcoming week was expected to shift the focus back to monetary and corporate matters. This included the release of U.S. producer and consumer price data for September, which would provide further insights into potential actions by the Federal Reserve.

Additionally, the third-quarter corporate earnings season was set to begin, featuring major banks such as JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) reporting their results. Analysts had become less optimistic about corporate profitability in recent weeks, with S&P 500 earnings expected to decline by 0.3% for the year ending in Q3 2023.

While there were no U.S. economic updates scheduled for release on Monday, there were statements expected from Federal Reserve officials, including Dallas Fed President Lorie Logan and Fed Governor Philip Jefferson. Tom Lee, head of research at Fundstrat, suggested that the ongoing Middle East conflict could potentially impact the U.S. economy through reduced consumer confidence or disruptions in the global economy, potentially influencing the Federal Reserve’s policy decisions.