US stocks (^DJI,^GSPC, ^IXIC) got off to a rocky start in October after escalating tensions in the Middle East sparked fears of a wider conflict. Traders flocked to more defensive areas of the market in Tuesday’s trading session, causing oil prices (CL=F, BZ=F) to spike and gold (GC=F) to hover near its record high.
Defense stocks like Lockheed Martin (LMT) and Northrop Grumman (NOC) also received a boost following the news of Iran’s missile attack on Israel.
For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.
This post was written by Melanie Riehl
Video Transcript
Our top story today, investors weighing a slew of headlines from strong jobs data to escalating geopolitical tensions and the ongoing port strikes.
Nearly all asset classes are responding here and we’ve got a look at the US futures here this morning that are in decline slipping for the dow, the S and P 500 the NASDAQ and the red fractionally as they may be.
These are some major events to really dive into and that investors have been weighing over the past 24 hours here.
Of course, some of the most recent jarring moves have really come off the back of the news yesterday surrounding the geopolitical tensions.
And this was actually something that we heard from Alex Carp, who is the CEO of Palantir back on their earnings call in August.
You heard about all these exogenous threats and what that could look like.
And he had said on that earnings call, the world is on the precipice of what could be a very severe set of violent interactions in the Middle East.
That’s just what’s playing out right now.
Markets responding.
Yes, we certainly did see a flight to safety yesterday.
I think we’re coming off the back of some of those highs here this morning.
But when you take a look at oil markets, this is really worth pointing out this jump that we did see yesterday was a 5% jump to the upside.
Today this morning, we’re looking at a further 3% move to the upside.
And the big concern here is the disruption, the supply disruption.
What exactly that could look like amid tensions in the Middle East.
And remember that is not the only headline though that is driving this upward movement that we have seen in the price of crude lately.
You also got the stimulus out of China last week.
Strong global liquidity that might help reverse some of some of the weakening that we have seen in oil prices.
So again, the move to the upside here in commodities also gold is worth watching as well.
So certainly some trades to keep in mind on the back of this heightened geopolitical risk.
Yes, that’s exactly right.
And one of the areas that investors typically look towards is we’re thinking about some of the sectors here.
I know you were focusing in on utilities.
One of the areas that I’m focusing more broadly is those defensive plays, defense names.
You’ve got names like Northrop Grumman who we brought up yesterday on the back of and on the heels of the initiation of some of these strikes here in the Middle East.
Those in focus here this morning, you’re seeing them continue to catch a little bit of a bit here, pre market fractional as it may be.
You’re taking a look at Lockheed Martin moving higher by about two tens of a percent.
Northrop Grumman up right now by about 3/10 of a percent.
