U.S. stocks traded sharply higher, Tuesday afternoon, as bond yields rose and oil prices slumped on signs of an easing of tensions over Ukraine, with Russian President Vladimir Putin saying Moscow is ready for talks with NATO on limits to missile deployments in Europe, following a claim that Russia is pulling back some troops in the area.
What are benchmarks doing?
- The Dow Jones Industrial Average DJIA, +1.22% was up 380 points, or 1.1%, at 34,945, after gaining as much as 482 points at its session high.
- The S&P 500 SPX, +1.58% gained 63 points, or 1.4%, to trade at to almost 4,464.
- The Nasdaq Composite COMP, +2.53% was up almost 314 points, or 2.3%, at 14,106.
On Monday, the Dow fell 172 points, or 0.5%, while the S&P 500 lost 0.4% and the Nasdaq Composite COMP, +2.53% fell fractionally.
What’s driving markets?
Stocks were up Tuesday afternoon as investors assessed signs that geopolitical tensions may be easing.
Following a meeting with German Chancellor Olaf Scholz, Russian President Vladimir Putin said that Moscow was ready for talks with the U.S. and NATO on limits on missile deployments and military transparency. Earlier Interfax reported the Russian Defense Ministry as saying that units of the southern and western districts are returning to base after completing military exercises.
NATO Secretary-General Jens Stoltenberg said that Moscow’s calls for continued diplomacy were cause for cautious optimism, “but so far we have not seen any sign of de-escalation on the ground from the Russian side,” Reuters reported.
“The Kremlin’s February 15 decision to pull back a few Russian troops and
to offer more talks with NATO does not change the fact that their troops
continue to mass around Ukraine on three sides, including from Belarus, a
Russian ally,” said Paul Christopher, head of global market strategy at Wells Fargo Investment Institute, in a note Tuesday.
NATO penalties could be “significant,” should Putin go ahead with an invasion, he said, citing the potential for sanctions that might aim to isolate Russia’s economy.
“There is little direct trade between Russia and the world outside of Europe, so both the sanctions on Russia and damage to sentiment likely will fall squarely on the European economies,” Christopher said. “Our conviction is that any Russian invasion should favor U.S. equities and a broad-based commodity exposure.”
While markets breathed a sigh of relief over the potential easing of geopolitical tensions, investors still have been digesting the likelihood of a series of interest rates rises by the Federal Reserve, likely starting in March, to combat inflation, which has risen to a 40 year high.
The latest update on U.S. inflation at the producer level did nothing to put worries to rest. The January producer-price index showed a 1% monthly rise, double the 0.5% increase expected by economists surveyed by The Wall Street Journal. The increase in wholesale prices over the past year, slowed a tick to 9.7% from 9.8%, which was the biggest advance in the index since it was configured in 2009, and one of the fastest rates since the early 1980s.
“Investors have been looking for some signs of easing, but early stage price pressures [are] gaining further momentum and likely to exacerbate near-term market volatility,” said John Lynch, chief investment officer for Comerica Wealth Management, in emailed comments.
In other data, the New York Fed’s Empire State business conditions index edged up to 3.1 in February, after a surprise negative 0.7 reading in January. Economists had expected a stronger rebound to a reading of 10, according to a survey by The Wall Street Journal.
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The “repricing of central bank expectations is the key driver of a good deal of the recent volatility,” said Michael Strobaek, global chief investment officer of Credit Suisse. “The geopolitical tensions, however, namely the escalation of tensions between NATO and Ukraine on the one side and Russia on the other, are less predictable, complicated and more difficult to price for markets.”
An armed conflict could lead global stock markets to drop more than 10%, he said.
Read: What a Russian invasion of Ukraine would mean for markets as Biden warns Putin of ‘severe costs’
Which companies are in focus?
- Shares of Marriott International Inc. MAR, +5.76% rallied 4.6%, pushing into record territory, after the hotel operator reported fourth-quarter adjusted profit and revenue that more than doubled to beat expectations, as revenue per available room (RevPAR) continued to improve as COVID-19 conditions eased.
- Intel Corp. INTC, +1.81% on Tuesday struck a $5.4 billion deal to buy Tower Semiconductor, as it seeks to bolster its manufacturing capabilities. Intel shares rose 1.1%.
- Virgin Galactic shares SPCE jumped almost 32% after the company said it is opening a limited opportunity for people to buy future spaceflight reservations on Feb. 16, for a total price of $450,000.
- Animal health company Zoetis Inc.’s shares ZTS rose 1% after it beat estimates for the fourth quarter and offered upbeat revenue guidance for 2022.
- Shares of MoneyGram International Inc. MGI, +19.55% soared 19% after the digital payments company announced an agreement to be acquired by private-equity firm Madison Dearborn Partners LLC (MDP) in a cash deal valued at $1.8 billion, including $799 million in debt.
How are other assets faring?
- Treasury yields continued to bounce Tuesday, with the yield on the 10-year Treasury note BX:TMUBMUSD10Y rising about 5 basis points to 2.04%. Yields and debt prices move opposite each other.
- The ICE U.S. Dollar Index DXY, which tracks the currency against a basket of six major rivals, declined 0.4%.
- West Texas Intermediate crude for March delivery CLH22 retreated 3.7% to around $91.91 a barrel, pulling back from the highest front-month contract finish since Sept. 3, 2014. The April gold GC00, -0.76% contract shed 0.7% to trade at $1,855.60 an ounce.
- The Stoxx Europe 600 SXXP closed 1.4% higher, while London’s FTSE 100 UKX gained 1%.
- The Shanghai Composite SHCOMP ended 0.5% higher on Tuesday, while the Hang Seng Index HSI fell 0.8% in Hong Kong and Japan’s Nikkei 225 NIK declined 0.8%.
—Steve Goldstein contributed to this article.
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