S&P 500 on course to rise following three days of losses; bond prices fall
U.S. stock indexes opened higher and European indexes rallied, following days of losses, while energy prices slumped and bonds sold off after Russia said it had pulled back some troops from the Ukrainian border.
The S&P 500 rose 1% Tuesday, putting the broad index on course to halt three days of losses after the opening bell. The blue-chip Dow Jones Industrial Average gained 0.8%, while the technology-heavy Nasdaq Composite rose 1.5%.
Yields on benchmark U.S. 10-year Treasury notes rose to 2.037% from 1.995% on Monday. Bond yields and prices move in opposite directions.
The threat of war between Ukraine and Russia has, in recent days, added a geopolitical element to an already troubled market outlook. Warnings from the U.S. and its allies about the likelihood of a Russian invasion have grown louder, spooking investors concerned about the economic hit from such a conflict or the resulting sanctions on Russia’s economy.
Those fears abated somewhat Tuesday after Russia’s Defense Ministry said some troops on the Ukrainian border were returning to their bases after completing training, though large-scale military manoeuvres continued elsewhere.
“The market is believing what it is hearing in the headlines, but you do have to be careful with these things,” said Hani Redha, a multiasset fund manager at PineBridge Investments. “We have to be cautious on news like this in the so-called fog of war.”
Oil prices dropped from the eight-year high they hit Monday. Brent crude, the international oil benchmark, fell 2.4% to $94.16 a barrel. Benchmark European natural-gas prices slumped over 9%.
European stock indexes rallied after Monday’s sharp losses, with the pan-continental Stoxx Europe 600 up 1.2%. Russia’s MOEX index jumped over 3%. The Russian ruble rallied 1.2% against the dollar, while the Ukrainian hryvnia rose 0.9%.
The yield on a dollar bond issued by the Ukrainian government maturing in 2033 fell to 10.233% from 10.807% Monday, according to Tradeweb. The yield on a dollar-denominated Russian government bond maturing in 2026 slipped to 3.982% from 4.307%.
Russia has been accelerating a troop buildup along Ukraine’s border, in recent days. Russian lawmakers Tuesday will consider proposals to formally urge President Vladimir Putin to recognize the separatist-controlled regions of eastern Ukraine as independent states, a move that could justify an incursion into its neighbor. Russia has denied it plans to attack.
Russia is among the world’s largest suppliers of oil, as well as the biggest exporter of wheat and a major producer of key metals, such as palladium, aluminium and nickel, while Ukraine is a key transit route for Europe’s natural gas supplies.
“The biggest impact this thing has had has been in commodities and the feed through of that into inflation,” said Mr. Redha. A conflict that pushes commodity prices and inflation higher could prompt central banks to raise interest rates faster than planned, he added.
Some investors are betting that the international economic impact from a conflict would be limited. “In the near term, the market will react first and ask questions later,” said Brian O’Reilly, head of the market strategy at Mediolanum International Funds. “But anything outside a massive escalation of tensions doesn’t really change the trajectory of the global economic outlook.”
Earnings season continues, with results due from companies including Airbnb after markets close. Marriott International shares rose over 3% in premarket trading after reporting that its fourth-quarter revenue doubled.
Nasdaq-listed Tower Semiconductor rose over 40% premarket after The Wall Street Journal reported that Intel was close to buying the Israeli chip company for nearly $6 billion.
Asian stock markets, which mostly closed before Russia announced its pullback, were generally lower. Both Japan’s Nikkei 225 and Hong Kong’s Hang Seng Index fell 0.8%. Mainland China’s Shanghai Composite Index rose 0.5%.
Source: Wall Street Journal
