By Stephen Culp
NEW YORK (Reuters) – Wall Street ended sharply higher on Tuesday, as signs of de-escalating tensions along the Russia-Ukraine border fueled a risk-on session.
All three major indexes notched solid advances on the day, with market leading tech and tech-adjacent stocks providing the biggest boost and putting the Nasdaq out front.
Geopolitical heat was turned down a notch after Russia said it had withdrawn some of its troops near the Ukraine border, prompting bullish equities sentiment and causing crude prices to slide on easing supply concerns. [O/R]
The announcement received guarded responses, and the United States and NATO said they had yet to see evidence of a drawdown.
Stocks briefly pared gains slightly late in the session, when U.S. President Joe Biden said that while diplomatic efforts are ongoing.
“Nice rally today, thanks to (Russian President Vladimir) Putin,” said David Carter, managing director at Wealthspire Advisors in New York.
“Markets have been moving based on Putin or (Federal Reserve Chairman Jerome) Powell,” Carter added. “Putin and his intentions with Ukraine and Powell and his intentions regarding interest rates.”
The CBOE market volatility index backed down from a three-week high.
On the economic front, a report from the Labor Department showed producer prices surged in January at twice the expected rate, reinforcing economist expectations that the Federal Reserve will take on stubbornly persistent inflation by aggressively hiking key interest rates.
“Inflation data suggests prices are rising, but markets already knew this,” Carter said.
The graphic below shows producer price index (PPI) data, along with other major indicators, and how far they have risen beyond the Fed’s average annual 2% inflation target:
GRAPHIC: Inflation – https://graphics.reuters.com/USA-STOCKS/zdvxoabdlpx/inflation.png
The market has now priced in better than even odds that the central bank will raise the Fed funds target rate by 50 basis points at its March monetary policy meeting.
“The market is now priced for a more aggressive Fed, and outside of geopolitics there’s reduced uncertainty,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. “But the market is never certain so you always dealing probabilities.”
According to preliminary data, the S&P 500 gained 69.30 points, or 1.57%, to end at 4,470.97 points, while the Nasdaq Composite gained 346.57 points, or 2.51%, to 14,137.49. The Dow Jones Industrial Average rose 421.15 points, or 1.22%, to 34,987.32.
Fourth quarter reporting season is entering its last stretch, with 370 of the companies in the S&P 500 having reported. Of those, 78.1% have beaten analyst estimates, according to preliminary Refinitiv data.
“It’s nice to have that earnings strength underlying these macro issues,” Mayfield added.
The Philadelphia SE Semiconductor index surged following Intel Corp’s announcement of a $5.4 billion deal to buy Israeli chipmaker Tower Semiconductor.
Restaurant Brands International rose after the fast food operator beat quarterly profit and revenue estimates.
Hotelier Marriott International also beat Street expectations due to rising occupancy rates, sending its shares sharply higher.
Other travel-related companies advanced, with the S&P 1500 airlines index and hotels/restaurants/leisure index both gaining ground.
Shares of cloud infrastructure company Arista Networks jumped after forecasting better-than-anticipated current quarter revenue.
(Reporting by Stephen Culp; additional reporting by Devik Jain, Susan Mathew and Shreyashi Sanyal in Bengaluru; Editing by Aurora Ellis)
