Wall Street’s main benchmarks advanced Tuesday as investors continued to monitor the Russia-Ukraine war and braced for a key monetary policy decision due out of the Federal Reserve Wednesday that could place short-term interest rates above near-zero levels for the first time since 2018. A COVID outbreak in China also presented new headline risk for traders to digest.
The S&P 500 edged 0.8% higher to 4,207.48 as of 9:33 a.m. ET after the index logged a “death cross” — when the 50-day moving average closes below the 200-day moving average — in Monday’s session. The Dow Jones Industrial Average jumped 290 points to 33,233.68, and the Nasdaq Composite was up 1% to 12,709.30.
Commodities extended a streak of gyrations. WTI Crude Oil futures fellow below $100 to around $96 a barrel, about 27% from record intraday high of $130.50 last week. Gold futures erased 2.2% to trade at $1,917.20 per ounce after recently topping $2,000.
“I fully expect crude oil is going to go back towards $40 or $50 a barrel,” Bloomberg Intelligence’s Mike McGlone told Yahoo Finance Live Monday. “From this war, I think we’re going to see a significant amount of demand destruction.”
China recorded a sharp rise in daily COVID-19 infections on Tuesday, with new cases more than doubling from a day earlier to hit a two-year high. The surge in infection raising questions about the economic cost of the country’s ultra-strict zero-COVID policy.
On the geopolitical front, Washington has warned Beijing against providing military or financial aid to Moscow following talks between U.S. national security adviser Jake Sullivan and top Chinese diplomat Yang Jiechi in Rome.
Meanwhile, the Kremlin denied reports by U.S. officials that said Russia requested military equipment from China after its invasion of Ukraine. Beijing called the reports “disinformation”.
In the U.S., markets may be little-shocked when central bank officials unveil the upshot of their two-day policy-setting meeting Wednesday after Federal Reserve Chair Jerome Powell signaled in recent Congressional testimony that he supports an increase of 0.25%. But traders will watch closely for possible changes to the Fed’s outlook on hiking plans for the remainder of 2022 as war in Eastern Europe hangs over the global economy.
Although Russia’s invasion of Ukraine has curbed the chances of a 50-basis point hike this month, escalating geopolitical turmoil — with no off-ramp in sight — raises a new set of uncertainties for the U.S. economy and complicates the Fed’s path forward on taming inflation.
“All signs point to a quarter-point interest rate hike from the Federal Reserve when their meeting concludes Wednesday,” Bankrate chief financial analyst Greg McBride said in a note. “The questions revolve around how many more are to come and how quickly.”
“The war in Eastern Europe gives the Fed reason to act more cautiously, but they will still be working to corral what is already the highest inflation in 40 years,” McBride said.
Surging commodity prices that have fueled discussions around the possibility of economic slowdown, stagflation, or a potential recession place further pressure on policymakers already tasked with mitigating soaring price levels, according to David Norris, TwentyFour Asset Management head of U.S. credit.
“Central bankers face a conundrum,” he said. “All things considered, I have no doubt this is one of the most important Fed meetings in recent memory given the current pace of market developments and the fluid nature of geopolitical events.”
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9:30 a.m. ET: Stocks open higher after S&P hits ‘death cross’ in previous session
Here’s how Wall Street’s main indexes fared at the stared of trading Tuesday:
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S&P 500 (^GSPC): +30.50 (+0.73%) to 4,203.61
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Dow (^DJI): +232.81 (+0.71%) to 33,178.05
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Nasdaq (^IXIC): -262.59 (-2.04%) to 12,581.22
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Crude (CL=F): -$6.77 (-6.57%) to $96.24 a barrel
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Gold (GC=F): -$43.60 (-2.22%) to $1,917.20 per ounce
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10-year Treasury (^TNX): -5.1 bps to yield 2.0890%
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9:05 a.m. ET: US producer prices log another sharp advance in February
U.S. producer prices logged another sharp increase during February amid a backdrop of higher prices on crude oil and other commodities as Russia’s invasion of Ukraine threatens to further disrupt global supply chains. The gauge serves as another indication that inflationary pressures are showing no signs of abating.
The Bureau of Labor Statistics’ producer price index for final demand rose 0.8% last month after accelerating 1.2% in January. PPI climbed 10% in the 12 months through February. Economists surveyed by Bloomberg expected an increase of 0.9% month-over-month and 10% for the yearly measure.
“The good news comes from seeing final demand services prices were unchanged in February for the first time in at least a year,” FWDBONDS chief economist Christopher S. Rupkey said in a note. “Inflation isn’t under control by any means, but the tide may be turning where inflation broadly speaking doesn’t grow any worse.”
Still, the data does not yet capture the skyrocketing prices of oil and other commodities since the war in Eastern Europe began Feb. 24.
“The million dollar question is how far inflation falls after the spike in energy prices starts to fade,” Rupkey said.
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7:00 a.m. ET: Contracts on S&P 500, Dow, and Nasdaq muted in pre-market trading
Here’s were the main moves in markets before the opening bell Tuesday:
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S&P 500 futures (ES=F): +6.00 points (+0.14%) to 4,178.00
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Dow futures (YM=F): +1.00 points (+0.00%) to 32,945.00
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Nasdaq futures (NQ=F): +39.75 points (+0.30%) to 13,085.25
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Crude (CL=F): -$6.31 (-6.13%) to $96.70 a barrel
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Gold (GC=F): -$35.70 (-1.82%) to $1,925.10 per ounce
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10-year Treasury (^TNX): +0.00 bps to yield 2.1400%
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6:00 p.m. ET Monday: Stock futures rise slightly after S&P 500, Nasdaq slide for third day
Here’s where stocks were trading ahead of the overnight session Monday:
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S&P 500 futures (ES=F): +10.25 points (+0.25%) to 4,182.25
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Dow futures (YM=F): +54.00 points (+0.16%) to 32,998.00
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Nasdaq futures (NQ=F): +44.25 points (+0.34%) to 13,089.75
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Crude (CL=F): -$0.85 (-0.83%) to $102.16 a barrel
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Gold (GC=F): -$5.90 (-0.30%) to $1,954.90 per ounce
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10-year Treasury (^TNX): +13.6 bps to yield 2.1400%
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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