Israel-Gaza Conflict Impacts Wall Street, Investors Seek Safe-Haven Assets -

Israel-Gaza Conflict Impacts Wall Street, Investors Seek Safe-Haven Assets

October 14, 2023

Summary of Wall Street’s Unpredictable Week

The trading week on Wall Street ended turbulently, with a volatile performance by stocks as investors favored safe-haven assets such as US Treasury bonds and gold. The market shift was attributed primarily to mounting tensions in the Israel-Gaza conflict, which indicated potential escalation over the weekend.

The Implications of the Israel-Gaza Conflict

Middle Eastern conditions deteriorated further when “Israel’s military prompted an evacuation of over a million people from Gaza”, suggesting a possible ground offensive. This impending crisis fostered significant market volatility, driving investors toward more secure investments.

Philadelphia Federal Reserve Bank’s Position on Interest Rates

Traders responded positively to remarks made on Friday by Patrick Harker, President of the Federal Reserve Bank of Philadelphia and a voting member of the FOMC. “Harker communicated that he does not foresee any need to further increase interest rates”, providing some reassurance in troubled times.

Effects on Financial Sector and Major Banks

Despite market volatility, the financial sector eked out minor gains signifying a broad optimism within the industry. This sentiment came after Q3 earnings reporting season kicked off with positive results from leading banks such as JPMorgan (JPM), Citigroup (C), and Wells Fargo (WFC). Notably, JPMorgan recorded yet another quarter of record net interest income due largely to high-interest rates and increased its net interest income prediction for the entire year leading to nearly 2% growth in the bank’s share value.

Impressive Performances from Wells Fargo and Citigroup

Wells Fargo (WFC) also reported a strong net interest income performance, boosting its shares by approximately 3%. However, despite revenues growing across its five prime business units, Citigroup (C)’s shares declined slightly by 0.2% at trading’s close.

Evaluations on Treasury Yields

Friday observed treasury yields fall, following a significant incline during the previous session. The 30-year Treasury yield ended the week at 4.787%, with the 10-year yield settling at 4.62%. The more rate-sensitive 2-year yield fell by two basis points to finish at 5.05%.

Weekly Recap of Major Indices

On a weekly note, both the Dow Jones closed up with a gain of 0.8%, and S&P 500 rose by 0.4%. Conversely, there was a slight dip in tech-focused Nasdaq that ended with a minor loss of 0.2%.

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