NEW YORK (AP) โ Oil prices rose Monday on concerns about violence in the Middle East. However, the stock market was less afraid and turned from initial losses to profits.
The S&P 500 rose 27.16 points, or 0.6%, following some potentially encouraging news on interest rates, which have been dragging Wall Street mostly lower since the summer.
The Dow Jones Industrial Average gained 197.07 points, or 0.6%, to 33,604.65, and the Nasdaq composite rose 52.90, or 0.4%, to 13,484.24.
Shares rose after Two Federal Reserve officials suggested they may not need to raise interest rates again. at its next meeting on Nov. 1, because a rise in long-term bond yields may be helping to cool inflation without the Federal Reserve making more market-shaking hikes.
That gave some oxygen to stocks and helped them erase modest losses from the morning. The S&P 500 had fallen up to 0.6% in its first session after Hamas launched a surprise attack against Israel, which then formally declared war.
The conflict area is not home to significant oil production, but fears that the fighting could spill over into politics around the crude market sent a barrel of US oil up $3.59 to $86.38. Brent crude, the international standard, rose $3.57 to $88.15 a barrel.
One possible outcome of the violence is a slowdown in Iranian oil exports, which have been growing this year, according to Amarpreet Singh, an energy analyst at Barclays. A lower supply of crude oil would raise its price, other things being equal.
The conflict could also harm the possibility of improving relations between Israel and Saudi Arabia, which is the world's second-largest oil producer. According to Singh, traders could be betting that Saudi Arabia would increase its oil production to help secure a deal on Israel with the United States.
Oil prices had already been volatile before the weekend. A barrel of US crude oil jumped from below $70 over the summer to above $90 last week, increasing pressure on inflation and the broader economy. It retreated sharply last week before jumping again after fighting began in Israel.
Monday's rise in crude oil helped oil and gas stocks achieve some of the biggest gains on Wall Street. Marathon Oil rose 6.6% and Halliburton rose 6.8%.
Stocks of defense contractors that make weapons were also particularly strong. Northrop Grumman surged 11.4% and L3Harris Technologies gained 10%.
At the opposite extreme were companies that consider fuel one of their biggest expenses. United Airlines sank 4.9% and Carnival fell 4.3%.
But it's interest rates and expectations about where they'll go that have been driving Wall Street's swings more than anything since early last year.
As inflation remains too high for the taste of policymakers and the The US economy in good shapeExpectations have built up on Wall Street that the Federal Reserve will keep its main interest rate high for longer than traders expected.
The Federal Reserve has already raised its overnight rate to the highest level since 2001, and last month indicated it may cut rates next year less than expected. As the Federal Reserve also continues to reduce its treasury of bond investments, the yield on the 10-year Treasury bond has jumped to its highest level since 2007.
Wall Street hates higher interest rates because they drive down the prices of stocks and other investments. They also make debt more expensive for all types of companies and households, which slows down the economy.
The 10-year yield has risen to 4.80%, up from 3.50% over the summer and from just 0.50% early in the pandemic. Trading in the US Treasury market was closed on Monday for a holiday.
Philip Jefferson, vice chairman of the Federal Reserve board and a close ally of Chairman Jerome Powell, said in a speech Monday that he would โremain mindfulโ of higher bond rates and โtake it into account as we assess future direction.โ of monetary policy. "
Lorie Logan, president of the Federal Reserve Bank of Dallas and a voting member of the Fed's rate-setting committee, said in a separate speech that there may be less need to raise the Fed's main interest rate if the Long-term rates remain high.
This week's reports on inflation at both the consumer and wholesale levels are the next big data to be released before the Federal Reserve makes its next interest rate announcement on November 1.
Next week will also mark the unofficial start of the S&P 500 earnings reporting season, with Delta Air Lines, JPMorgan Chase and UnitedHealth Group among the big companies scheduled on the calendar.
In Israel, the country's central bank said it will sell up to $30 billion in foreign currency to shore up the shekel, whose value plummeted after the violence began. It also said it will provide up to $15 billion to support market liquidity.
The shekel fell 2.3% against the US dollar and returned to the level it was in 2016.
In addition to the US dollar, another investment that typically performs well in times of stress also rose. Gold added $19.10 to $1,864.30 an ounce.
In foreign stock markets, indices fell modestly in Europe and were mixed in Asia. Shares in Shanghai fell 0.4% after trading reopened following a week-long holiday.
AP Business Writers Matt Ott and Elaine Kurtenbach and AP Writer Jon Gambrell contributed.
