U.S. stocks gained ground Tuesday, finding support after a smaller-than-expected rise in a measure of wholesale inflation and a pullback by previously soaring oil prices.
Investors continued to monitor developments in the Russia-Ukraine war and prepared for the kickoff of a two-day Federal Reserve policy meeting that’s fully expected to conclude with a benchmark interest rate increase and will be closely watched for clues to further monetary tightening.
What are major indexes doing?
- The Dow Jones Industrial Average DJIA,
+0.99%rose 346 points, or 1%, to 33,292.
- The S&P 500 SPX,
+1.33%was up 54 points, or 1.3%, at 4,227.
- The Nasdaq Composite COMP,
+1.94%advanced 224 points, or 1.8%, to 12,805.
On Monday, the Dow Jones Industrial Average eked out a gain of around one point, while the S&P 500 declined 0.7% and the Nasdaq Composite dropped 2%.
What’s driving markets?
Stock indexes were buoyed after the U.S. February producer-price index showed a monthly rise of 0.8%. Economists surveyed by The Wall Street Journal had looked for a 0.9% rise. The year-over-year rate was unchanged at 10%.
Separately, the New York Fed’s Empire State manufacturing index slumped 14.9 points to negative 11.8 in March. Economists had expected a reading of 5.5.
While the economic readings cheered traders worried about inflation, they’re seen as unlikely to alter the Fed’s path. Policy makers kick off a two-day meeting Tuesday, and are fully expected to make a quarter-point rate increase on Wednesday.
The Dutch bank ABN Amro is expecting seven quarter-point rate hikes this year, and another three next year. “Despite the growth dampening effects of higher commodity prices, the conflict makes the case even stronger for rate hikes, rather than weaker,” said Bill Diviney, senior economist at ABN Amro.
A retreat by oil prices was also seen lending support to equities. The U.S. benchmark CL.1,
Meanwhile, China’s at the heart of two stories that worry investors. U.S. and Chinese officials met in Rome on Monday, with little apparent agreement, as American negotiators said Russia was looking to circumvent sanctions by procuring Chinese arms. U.S. officials have threatened to also sanction China.
At the same time, China’s been fighting a coronavirus outbreak, tightening controls at ports after locking down the technology and finance hub of Shenzhen. Beijing also locked down Changchun, an auto center in the northeast, the Associated Press reported, with bus service to Shanghai, China’s business capital and biggest city, suspended
“In terms of catalysts, it is a bit of a perfect storm, with a sharp rise in COVID cases in China and implications for demand and supply chains and further worries about the China-Russia relationship and possible sanctions if China was to provide support to Russia visibly,” said Stephen Innes, managing partner at SPI Asset Management.
The COVID lockdowns were seen contributing to the retreat by oil prices, though market watchers said volatility in commodity prices around the war would remain a source of concern. The Organization of the Petroleum Exporting Countries on Tuesday warned in a monthly report that the Russia-Ukraine war could stoke inflation and end up undercutting demand for as the cartel placed its forecasts for oil demand growth, supply growth and the global economy “under assessment” due to heightened uncertainty.
“Fortunately, oil is off its high, but anything could happen and its path ahead will be important to the Fed,” said John Vail, chief global strategist at Nikko Asset Management, in a note. “The Fed is also cognizant of the 1960s when political considerations, the Vietnam War in that case, were used to pressure the Fed to remain dovish but unfortunately eventually led to sustained high inflation.”
Which companies are in focus?
- Airline stocks were in the spotlight. JetBlue Airways Corp. JBLU,
+8.24%, Delta Air Lines Inc. DAL, +8.54%, and Southwest Airlines Co. LUV, +5.11%all raised their first-quarter revenue outlooks on Tuesday, while United Airlines Holdings Inc. UAL, +9.31%said it expects first-quarter total operating revenue to be near the better end of previous guidance. Shares for all four carriers were higher, while the U.S. Global Jets ETF JETS, +5.46%rose 5.1%.
- In a surprise move, theater chain and meme-stock favorite AMC Entertainment Holdings Inc. AMC,
+2.65%said it was buying 22% of Hycroft Mining Holding Corp. HYMC, +20.96%and its 71,000 acre Hycroft Mine in northern Nevada. AMC shares rose 1.2%, while Hycroft shares were up 27% but well off early session highs that saw the stock up more than 70%.
What are other assets doing?
- The yield on the 10-year Treasury note TMUBMUSD10Y,
2.124%was down 3.7 basis points at 2.104%. Yields and debt prices move opposite each other.
- The ICE U.S. Dollar Index DXY,
-0.15%, a measure of the currency against a basket of six major rivals, fell 0.2%.
- Gold futures GC00,
-2.27%were in retreat, down 2.6% to trade below $1,910 an ounce.
- Bitcoin BTCUSD,
+1.06%fell 1.5% to around $39,030.
- The Stoxx Europe 600 SXXP,
-0.27%fell 0.5%, while London’s FTSE 100 UKX, -0.49%was off 0.7%.