Dow Jones jumps over 350 points as investors await this week’s Fed decision

What’s driving markets

Stock buyers returned after the S&P 500 on Friday joined the Nasdaq Composite in correction territory having shed more than 10% from its recent high at the end of July to close at its lowest since May.

See: S&P 500 index enters a correction. Here’s what it means for future performance.

Relief that the Israel-Hamas war had not drawn in other combatants in the region over the weekend was helping sentiment, according to analysts. Oil futures fell sharply Monday, with the U.S. benchmark down 3.2% to trade at $82.80 a barrel, largely erasing gains seen since the Oct. 7 Hamas attack on southern Israel.

“Despite the terrible events in Israel and Gaza, oil prices have generally been well behaved and, with global growth looking sluggish, should stay that way, barring a broadening of the Middle East conflict,” David Kelly, chief global strategist at J.P. Morgan Asset Management, said in a note.

“Meanwhile, gasoline prices have drifted lower as refiner margins have eased, suggesting that energy inflation should be negative for October,” he wrote.

Stock-market investors weighed a report the Bank of Japan may move Tuesday to loosen its cap on 10-year Japanese government bond yields
BX:TMBMKJP-10Y
by allowing the rate to rise above 1%. A move to loosen the cap in July, moving it from 0.5% to 1%, sent tremors through global markets.

See: Bank of Japan may further loosen cap on long-term bond yields, report says

Equity benchmarks have suffered of late partly because of some poorly received third-quarter earnings — notably from big technology firms that had led the broader market higher for much of the year. The next tech behemoth to present its numbers will be Apple Inc.
AAPL,
+1.28%
after the market closes on Thursday.

Earnings Watch: Big Tech earnings have been strong, but Apple is about to answer the thousand-dollar question

Earnings season remains in full swing, with investors digesting results from corporate heavyweights early Monday.

Another factor pressuring equities over the past several weeks was the lurch higher in benchmark bond yields
BX:TMUBMUSD10Y
to 16-year highs above 5% on concerns a robust economy will force the Federal Reserve to keep interest rates high for longer and, amid fears additional Treasury issuance, will push down prices.

Both of those issues will be addressed Wednesday, when the Treasury will publish its quarterly refunding announcement in the morning, followed in the afternoon by the Fed’s latest interest rate decision. Treasury on Monday afternoon will announce its borrowing estimates for the fourth quarter of this year and the first quarter of 2024.

Check out: How stock-market investors can ride out a ‘fear cycle’ as S&P 500, Nasdaq fall into correction

Fed Chair Jerome Powell and fellow policy makers are expected to leave borrowing costs unchanged at a range of 5.25% to 5.5%, so investors will be eager to hear if he gives any clues about Fed trajectory in coming months.

The nonfarm payrolls jobs report on Friday will doubtless play an important role in the Fed’s future deliberations.

Companies in focus

• Shares of Dow component McDonald’s Corp.
  MCD,
  +2.15%
  rose 2%, after the fast-food restaurant giant reported third-quarter results that rose above expectations, with price increases helping boost U.S. results.

• SoFi Technologies Inc.
  SOFI,
  -0.07%
  on Monday posted a large revenue beat for the latest quarter and gave an upbeat outlook. Shares were up 1.2%.