U.S. Stocks Rally, Led by Energy Sector 

Traditional haven investments such as gold and government bonds tick higher

Markets broadly shook off concerns stemming from the deadly terror attacks in Paris, even as oil prices rose on the prospect of greater violence in the Middle East.

Energy shares led the Dow industrials higher by nearly 238 points following their first week of losses in nearly two months. Haven assets such as gold and U.S. Treasurys got a minor boost, and stocks that benefit from tourism like luxury goods and airlines were hurt, but there was no sign of a broad flight from risk.

“The first reaction is panic, but then people take a look at the history books,” saidAndreas Koester, head of asset allocation and currency at UBS Global Asset Management, which oversees about $650 billion of assets.

Monday’s gains more than erased Friday’s losses for the Dow and S&P 500. Stocks dropped sharply last week amid a fall in commodities prices and as investors braced for the a potential interest-rate increase by the Federal Reserve in December.

Energy stocks gained 3.3%, the most in the S&P 500. U.S.-traded crude oil fell to within six cents of $40 a barrel early in the day, but then rebounded and settled up 2.5% at $41.74 a barrel partly on concerns that violence in the Middle East could lead to oil-supply disruptions as the French government retaliates against Islamic State in the aftermath of the Paris attacks on Friday. The gains followed an 8% drop in the price of oil last week, the largest one-week percentage decline since March.

Investors and analysts noted that the impact of terrorist attacks on markets in recent years has steadily waned.

The Dow fell 7.1% on its first day of trading after the Sept. 11, 2001, terror attacks. After explosions on trains in Madrid left about 191 people dead in 2004, Spain’s benchmark index closed down 2.2%. The London bombings in July 2005 sent the FTSE 100 down 1.4%.

Investors say reactions to terrorist attacks are increasingly fleeting, because of their frequency and as markets conclude that such atrocities have relatively little economic impact.

U.S. stock indexes opened lower, but after early trepidation investors piled into shares. The Dow Jones Industrial Average ended the day up 237.77 points, or 1.4%, to 17483.01. The S&P 500 added 30.15, or 1.5%, to 2053.19, and the Nasdaq Composite was up 56.73, or 1.2%, to 4984.62.

The Stoxx Europe 600 rose 0.3%. France’s CAC 40, which had fallen more than 1% in early trading, declined 0.1%.

Shares of global security and aerospace company Lockheed Martin rose $7.51, or 3.5%, to $220.67, and the iShares U.S. Aerospace & Defense ETF, whose top holdings includeBoeing, United Technologies and Lockheed Martin, was up 2.4%.

“Defense stocks are up quite strongly, which is not a surprise” as France and other countries ramp up their fight against Islamic State, saidSam Stovall, U.S. equity strategist at S&P Capital IQ.

With investors focusing on central banks and Chinese growth, markets—from equities to bonds and gold—weren’t panicked by the Paris attacks. While financial markets recovered in comparable terror attacks in Madrid in 2004 and London a year later, the speed with which these assets regrouped on Monday suggests investors have become more used to terror on their own streets.

The traditional haven investments of gold and government bonds ticked higher, with investors expected to soon focus again on fundamental factors, such as U.S. interest rates. Gold rose 0.3% to $1,083.70 an ounce. The 10-year Treasury note’s yield fell to 2.273%, from 2.280% Friday. Prices rise as bond yields fall.

In currency markets, the euro slipped 0.8% against the dollar to $1.0686, its lowest in seven months, as investors sought protection in the currency in the wake of Friday’s terrorist attacks. Some investors said the euro also weakened against the dollar as the attacks may give the European Central Bank more reason to boost its stimulus program.

“We have our own issues going on with the Fed and rates and the U.S. economy, and that’s causing key asset managers to sit tight a little bit,” said Kenny Polcari, director at O’Neil Securities.

Still, some stocks did fall in the wake of the attacks. Airlines and travel companies, viewed by investors as most directly exposed to a loss of business after the attacks, sank.

Shares of Air France-KLM fell €0.38 ($0.41), or 5.7%, to €6.41 in Paris amid a broad selloff in travel stocks. In the U.S., American Airlines Group fell 62 cents, or 1.4%, to 42.83. Travel-booking sites Expedia lost 2.67, or 2.1%, to 122.53 and Priceline Group fell 30.88, or 2.4%, to 1266.87.

“Short-term underperformers might be airlines, travel and luxury stocks which have benefited from Asian tourism to Europe,” said Ralf Zimmermann, equity strategist at Bankhaus Lampe.

Cruise-line companies also traded sharply lower, with Carnival down 79 cents, or 1.5%, to 50.77.

In other corporate news, Clovis Oncology shares tumbled 69.19, or 70%, to 30.24, after the biopharmaceutical company said the U.S. Food and Drug Administration requested additional clinical data, delaying potential approval for Clovis’s lung-cancer drug. The news weighed on other companies whose treatments are also in trial stages.

“Anytime you have a situation like Clovis today, it gives people pause in the biotech space,” said Ian Winer, director of equity trading at Wedbush Securities.

Asian equity markets fell Monday. Data showing that Japan’s economy shrank in the third quarter weighed on sentiment, analysts said. Japan’s Nikkei Stock Average fell 1%, and Hong Kong’s Hang Seng Index fell 1.7%.

Monday’s moves came after Wall Street snapped a six-week winning streak on Friday, as weak earnings and economic data weighed on retail shares.

U.S. and European stocks had seen steady gains in October following an August selloff, but dropped sharply last week amid a fall in commodities prices and as investors braced for the Fed to raise interest rates in December. Its loose monetary policy has boosted stocks in recent years.

Source: WSJ – U.S. Stocks Rally, Led by Energy Sector

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