Stocks climbed higher Monday, reversing earlier losses as investors digested geopolitical tensions driven by the deadly Israel-Hamas conflict over the weekend. The Dow Jones Industrial Average climbed nearly 200 points, while the S&P 500 Index and Nasdaq Composite added 0.6% and 0.4%, respectively.
Here's how the market settled on Monday:
S&P 500 Index (NYSE: SPY): +0.63% or +27.16 points to 4,335.66
Dow Jones Industrial Average (NYSE: DIA): +0.59% or +197.07 points to 33,604.65
Nasdaq Composite Index (NASDAQ: QQQ): +0.39% or +52.90 points to 13,484.24
Stocks came under pressure Monday after the Israeli-Palestinian conflict led to concerns over the energy market, as well as fears that geopolitical tensions stemming from Hamas' attack on Israel and the retaliatory Israeli strikes on Gaza could bring further volatility to Wall Street.
West Texas Intermediate (NYSE: USO) crude futures rose 4.3% on Monday, settling at $86.38 per barrel, while international benchmark Brent Crude (NYSE: BNO) gained 4.2% to $88.15 per barrel. Big names in the energy sector such as Halliburton (NYSE: HAL), Marathon Oil (NYSE: MRO) and ConocoPhillips (NYSE: COP) each rose roughly 6%.
Shares of major defense stocks including Northrop Grumman (NYSE: NOC) and Lockheed Martin (NYSE: LMT) also soared higher on news that Israeli Prime Minister Benjamin Netanyahu declared that his country is at war.
Bank of America analyst Ronald Epstein wrote in a note Monday that the conflict is "potentially something larger," than previous attacks and may lead the U.S. government to increase defense investments to aid Israel.
"Ultimately, the US will be supplying munitions, missiles, and anti-missile systems to two allies (Ukraine and Israel) on top of supplying its own needs. As in any resource-constrained environment, difficult choices may have to be made as to who gets what from Pentagon inventories," Epstein wrote.
The analyst added that investors should focus on defense stocks including Lockheed, Northrop, General Dynamics (NYSE: GD), Raytheon Technologies (NYSE: RTX) and L3 Harris (NYSE: LHX) for their "exposure to missiles, missile propulsion systems, land systems (wheeled and tracked armored vehicles), and munitions."
Elsewhere, the Wall Street Journal reported Sunday that activist investor Nelson Peltz's Trian Fund Management increased its stake in Disney (NYSE: DIS) to about $30 million shares -- valued at about $2.5 billion, according to sources familiar with the matter. The firm plans to seek multiple seats on the entertainment giant's board, according to WSJ.
Looking ahead, the third-quarter earnings season kicks off this week, offering fresh reports from companies including JPMorgan Chase (NYSE: JPM), Citigroup (NYSE: C), Wells Fargo (NYSE: WFC), UntiedHealth Group (NYSE: UNH), Delta Air Lines (NYSE: DAL), Walgreens Boots Alliance (NASDAQ: WAL), PepsiCo (NASDAQ: PEP) and BlackRock (NYSE: BLK) throughout the week.
Fresh inflation readings including PPI and CPI for September, as well as preliminary consumer sentiment for October. are also due to release this week.