Paris strong: Dow up 238 as benchmarks bounce

U.S. stocks joined markets around the world in reacting in a muted fashion to the deadly terror attacks in Paris late Friday, as investors seek solace in history that shows acts of terrorism do not have a large or lasting impact on the economy.

The Dow Jones industrial average ended up about 238 points, or 1.4%. The Standard & Poor's 500 index climbed 1.5% and the Nasdaq composite index gained 1.2%.

Financial market history shows that the U.S. stock market often takes a short-term hit after terror incidents, but that the declines are short-lived and any losses are quickly recouped.

The impact on financial markets following the Paris attacks, however, seem to be far less dire, perhaps due to the fact that the attacks occurred late Friday when markets were closed, eliminating the chance for the knee-jerk reaction to sell first and ask questions later.

"The risk asset reaction following the terrorist attacks in Paris has been muted," Sreekala Kochugovindan of Barclays told clients in a report this morning.

The yield on the 10-year Treasury note fell to 2.26%, down from 2.28% late Friday. Gold prices moved higher, rising 0.3% to 1,084 an ounce. Oil prices recovered after initially falling in early trading as U.S. benchmark crude gained 1.5% to $41.35 a barrel in afternoon trading.

Stock markets in Europe, which are near the epicenter of the Paris attacks, have held up very well despite the horrific events which resulted in 129 deaths. The CAC 40 in Paris was down a modest 0.1% in trading Monday, and shares of Germany's DAX index were up slightly, rising 0.04%. London's FTSE 100 gained 0.5% and the broader Stoxx Europe 600 was up 0.4%.

Wall Street is betting that the economic impact will be limited, although the fallout has yet to be quantified as the attack occurred just a few days ago.

"It's too soon to conclude that this latest terrorist strike in Europe will have any significant impact on the region's economy, which has been growing at a snail's pace in any case," Ed Yardeni of financial research firm Yardeni Research, told clients.

Despite the human tragedy, it is incumbent on professional investors to analyze the risks following a terror attack professionally, Tobias Levkovich, U.S. equity strategist at Citigroup said in a report titled "Terror in Paris."

"The deplorable and horrific attacks sadly have reminded people that the scourge of terror is not limited to New York, London, Madrid, Sydney, Bali, Bombay and the Middle East, with some investors concerned that equity markets are vulnerable to further weakness given the sharp selloff last week, Levkovich wrote in a note to investors issued before U.S. markets opened. "While putting worries about the stock price levels in any discussion when still grieving the incomprehensible losses seems callous and devoid of sympathy, financial markets are set to open and one needs being professional while simultaneously being outraged."

Levkovich reminds clients that Wall Street has survived terror attacks in the past, including 9/11 as well as terror bombings in London and Madrid.

"In the past," he wrote. "the U.S. stock market has rebounded rather quickly from geopolitical events that have occurred outside America, including acts of terrorism."