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Market Snapshot: Dow industrials mount 500-point rally as Powell points to smaller rate hike in March

U.S. stock indexes traded solidly higher Wednesday morning, with investors taking some hope from headlines that indicated Ukraine and Russia could be headed for fresh negotiations even as the conflict continues.

Meanwhile, Federal Reserve Chairman Jerome Powell said the central bank intends to raise its policy interest rate following the end of its two-day meeting on March 16, despite uncertainties stemming from the Eastern European conflict.

What are stock benchmarks doing?

The Dow Jones Industrial Average
DJIA,
+1.03%

rose 324 points, or 1%, to 33,627.

The S&P 500 index
SPX,
+0.88%

climbed 46 points, or 1.1%, at 4,353.

The Nasdaq Composite Index
COMP,
+0.42%

rose 122 points, or 0.9%, to 13,652.

On Tuesday, the Dow fell nearly 600 points, or 1.8%, while the S&P 500 and Nasdaq Composite each slid 1.6%.

What’s driving the market?

Stocks were climbing as investors monitored headlines from the now seven-day old conflict in Ukraine that has seen Russian forces step up shelling of civilian areas.

Fresh gains appeared to coincide with reports Russian delegates were ready to resume talks with Ukraine officials on Wednesday evening, though there was no immediate response from the Ukrainian side. Meanwhile, Russian Foreign Minister Sergei Lavrov reportedly said in a speech that a third World War would be nuclear and destructive,

Surging energy prices were also in focus for Wednesday, with April West Texas Intermediate crude
CLJ22,
+4.98%

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Oil prices continued to climb despite Tuesday’s decision by International Energy Agency member countries to release 60 million barrels of oil from their emergency reserves, to help with any supply shortfall caused by Russia’s invasion of Ukraine, now entering its seventh day.

Read: Emergency plan to ease global oil-shortage fears amid the Ukraine-Russia crisis has seemingly backfired—here’s why

OPEC+, made up of the Organization of the Petroleum Exporting Countries and its allies, including Russia, offered no surprises at its monthly meeting, quickly agreeing to boost production in April by another 400,000 barrels a day.

“So far, the cartel confirmed that they remain committed to the OPEC+ deal with Russia, and they are not expected to change their production boost plans despite the Ukrainian war,” said Ipek Ozkardeskaya, senior analyst at Swissquote, in a note to clients.

“If that’s the case, we shall see the positive pressure on oil prices intensify above the $100 per barrel level, and we could see the barrel of US crude advance toward the $125/150 range,” said the analyst.

Elsewhere, President Joe Biden delivered an optimistic State of the Union speech on Tuesday, saying that America is “stronger today than we were a year ago,” even as war rages on in Eastern Europe and concerns about inflation linger domestically.

Biden offered a plan to drive down inflation by boosting domestic manufacturing and highlighted treatments and vaccines against the coronavirus, despite fears of new variants.

The speech came the U.S. announced that it was closing off American airspace to all Russian flights, a point that Biden mentioned in his speech, “further isolating Russia and adding an additional squeeze on their economy.”

The president also said Russia President Vladimir Putin’s unprovoked attack against Ukraine “will have left Russia weaker and the rest of the world stronger.” Russian troops were encircling key cities in Ukraine early Wednesday, with an escalation of attacks on urban areas and fears of much bloodshed to come this week.

See: Zelensky says Putin is now resorting to the tactics of a terrorist in Ukraine offensive

This year has been uniquely challenging for investors, with the S&P 500 down 10% to date in 2022, as investors prepare for the Federal Reserve to raise interest rates in response to high inflation and enter a new phase of the COVID-19 pandemic.

Fed fund futures are pricing in a near-zero chance the Federal Reserve will raise interest rates by a half-point in March, a dramatic shift, and now largely look for a quarter-point rise.

“With inflation well above 2% and a strong labor market, we expect it will be appropriate to raise the target range for the federal-funds rate at our meeting later this month,” Powell said, in remarks prepared for delivery to the House Financial Services Committee.

Ahead of that testimony, Chicago Fed President Charles Evans predicted that U.S. inflation likely to be 3% to 3.5% by end of 2022. St. Louis Fed President James Bullard was also expected to speak after the market opens.

In economic reports, the private sector added 475,000 new jobs in February, payroll processor ADP said — after omicron faded, governments eased pandemic restrictions and the economy perked up. Economists surveyed by The Wall Street Journal had forecast a 400,000 increase.

The report comes ahead of the Labor Department’s more closely watched employment report on Friday.

Which companies are in focus?

Shares of Nordstrom rose on Wednesday after the retailer said it earned $1.23 a share on revenue that rose more than 23% to $4.38 billion. Analysts were looking for earnings per share of $1 on revenue of $4.36 billion.

Ford Motor Co.’s stock
F,
+5.48%

was in focus after it reported U.S. auto sales of 129,273 vehicles, down 20.9 from a year ago. It also said it would split its electric-vehicle unit from its legacy automobile manufacturing.

Shares of electric-vehicle maker Rivian Automotive
RIVN,
-9.74%

 were under pressure after it said it was raising prices to help the startup offset higher costs of production.

Shares of banking giant Citigroup
C,
-4.04%

were in focus as its CEO Jane Fraser outlines a three-phase plan to streamline operations and improve returns. The plan comes one year after Jane Fraser became chief executive of the global institution

How are other assets faring

The 10-year Treasury note
TMUBMUSD10Y,
1.792%

yields around 1.79%, up 8.2 basis points.

The ICE U.S. Dollar Index DXY rose 0.2%.

Gold futures GC00, -0.54% for April delivery GCJ22 were down 0.5% to reach $1,930 an ounce after a 2.3% rise a day ago, which brought it to its highest settlement since January 2021, according to FactSet data.

Bitcoin BTCUSD gave up 0.3% at around $43,850.

The Stoxx Europe 600 SXXP traded 0.4% higher, while London’s FTSE 100 UKX rose 0.9%.

In Asia, the Shanghai Composite SHCOMP ended 0.1% lower, while the Hang Seng Index HSI closed down 1.8% in Hong Kong and Japan’s Nikkei 225 NIK declined 1.7%.

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