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Market fortunes changed midday today, where they started the trading week in the negative before turning sunnier, and staying up through the remainder of the session. The Dow grew by 197 points on the day, +0.59%, the S&P 500 was +0.63%, the Nasdaq +52 points, +0.39%, and the small-cap Russell 2000 +0.60%. This is also the third day in the last four where we’ve seen market indices closer higher.

Two Fed officials — Governor Philip Jefferson and Dallas Fed President Lorie Logan — both made appearances today, and both commented that high bond yields, on the 10-year especially, are helping the Fed do its job of bringing down inflation. Though the bond market was closed today for a bank holiday, the 10-year at roughly 4.8% and the 2-year around 5.1% represent historically high yields which we’ve seen over the past month or so cool markets. Neither official said another 25 basis-point (bps) rate hike at its November meeting was off the table, but neither appeared to be in a hurry to crank rates up further.

This caused the change of mood among market participants all by itself, though there are other developments that, while dire and tragic on the ground, look to be giving a boost to certain areas of the market. Oil prices, for instance, are up, along with defense stocks like Northrop Grumman (NOC), which gained a lofty +11.5% on the day. WTI crude reached $86 per barrel, +4.2%, while gold reached its highest level in a month.

The attacks on Israel by the Palestinian group Hamas is the center of global news today. Neither is an oil producer of any note, though the apparent proxies in this turmoil — Iran and Saudi Arabia — very much are. Also, the business of war — such as warships, planes, and munitions — are all very energy intensive. We have seen oil prices on the wane in all but a few key areas of the U.S., like California, but depending on these countries’ involvement in the crisis over time, we may see destabilization of energy prices in the Middle East.

The U.S. already gives more than $3 billion annually to Israel in military aid, and a “complete siege” has already been ordered by Israeli forces on the Gaza Strip, which is now 140 miles of land on the greater Mediterranean containing more than 2.3 million people. Though the fear is this conflict may expand to the other larger countries, there’s nothing imminent at this stage. Defense companies have been bought up today, but we’ll see if this is a lasting development. We also do not have a U.S. House of Representatives currently in operation, so the level of additional military and/or financial assistance cannot be currently determined.

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