May 29, 2022

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Stocks rise, oil prices soar as investors eye Russia’s war, Powell’s testimony

Stocks rose on Wednesday to recover some steep losses from earlier this week, with jitters over Russia’s war in Ukraine and its implications for the global economy weighing on risk assets. Investors also monitored fresh remarks from Federal Reserve Chair Jerome Powell, who said the central bank remained on track to raise interest rates later this month as the economy remained firm despite ongoing geopolitical tensions.

The S&P 500 advanced by more than 2% at session highs. On Tuesday, the blue-chip index slid 1.6%, extending Monday’s losses to kick off March trading on shaky footing. The Dow and Nasdaq each also rebounded after falling sharply earlier this week, with risk assets reeling as investors contemplated the potential for more widespread supply chain and financial market disruptions as Russia deepened its attacks in Ukraine, and Western sanctions progressed.

Amid the ongoing geopolitical concerns, energy prices climbed, and West Texas intermediate crude oil prices rocketed further above $100 per barrel to top $112 and reach the highest level since 2011. OPEC+ said Wednesday that it would continue to increase output in April by 400,000 barrels per day compared to March, keeping this rate of production increases in-line with recent months’ rises despite strained oil supplies.

The latest move higher in energy markets also came even after the International Energy Agency agreed Tuesday to release 60 million barrels from global stockpiles to help ease some pressure in the tight energy market.

“The problem is that that would not be enough to offset a potential supply shock coming from Russia, which is really what the market is grappling with right now,” Ahmed Riesgo, Insigneo chief investment officer, told Yahoo Finance Live.

“The key question that all investors have to ask themselves right now is, are Russian exports going to stop? And if the answer to that is yes, then we need to de-risk further,” he added about the broader markets. “And if the answer is no, then this could potentially be near a bottom.”

The West’s sweeping sanctions against Russia have so far formally included restrictions on Russia’s central bank, access to the SWIFT global payments system, and freezes on a variety of key Russian institutions’ and officials’ assets, among some other measures.

Many major companies have also added further pressure to Russia, including Apple (AAPL), which said Tuesday it would pause all product sales to the country, and Disney (DIS), which said it will stop releasing films in Russia. Still, with many S&P 500 components seeing relatively little exposure to Russia and Ukraine from a revenue standpoint, many strategists suggested the direct fallout to U.S. corporate profits and broader economy will likely be relatively contained.

“Concerns are growing that the ramped-up sanctions on Russia and its leaders, now including restrictions on the important SWIFT banking system, as well as the Russian central bank and Putin himself, will have repercussions on global commerce that are hard to predict,” Louis Navellier, chairman and founder of Navellier & Associates, wrote in a note. “This is on top of the disruption of all the products that Ukraine itself delivers to the world markets. It is generally believed that the majority of the damage will hit Europe, with China already seen stepping up to provide alternate markets for Russian exports, making the U.S. even more of a safe haven than it was already considered.”

Still, the uncertainty generated by the war and the potential for higher global energy prices have left investors betting the Federal Reserve will eschew an ultra-hawkish tilt after its March monetary policy meeting. Fed Chair Jerome Powell is set to testify before Congress on Wednesday starting at 10 a.m. ET as part of his semi-annual appearance before lawmakers, offering the Fed leader’s first public remarks on how the geopolitical situation has informed the central bank’s thinking on interest rate hikes and monetary policy tightening for the rest of the year. And to that end, Powell said in prepared remarks that he still expects “it will be appropriate to raise the target range for the federal funds rate at our meeting later this month,” though the geopolitical tensions will require the Fed to be “nimble.”

“We think it likely that the next forecasts, due three weeks from now, would have shown five or even six [interest rate] increases this year, before the invasion of Ukraine,” Ian Shepherdson, chief economist for Pantheon Macroeconomics, wrote in a note Tuesday. “Now, we’d be very surprised to see six tightenings, and some of the wilder market forecasts now look adrift. We never expected a 50bp [basis point] move in March, and it looks even less likely now.”

1:07 p.m. ET: Stocks extend gains, Dow rises by 2%

Here’s where markets were trading Wednesday afternoon:

  • S&P 500 (^GSPC): +87.62 (+2.03%) to 4,393.88

  • Dow (^DJI): +669.56 (+2.01%) to 33,964.51

  • Nasdaq (^IXIC): +214.91 (+1.59%) to 13,748.13

  • Crude (CL=F): +$5.83 (+5.6%) to $109.24 a barrel

  • Gold (GC=F): -$23.80 (-1.22%) to $1,920.00per ounce

  • 10-year Treasury (^TNX): +12.4 bps to yield 1.835%

12:13 p.m. ET: Powell says Fed is ‘monitoring the situation closely’ between Russia and Ukraine

Federal Reserve Chair Jerome Powell’s testimony on Wednesday helped fuel a risk-on rally across U.S. equity markets, with the Fed chief offering more near-term clarity on the path forward for monetary policy despite ongoing geopolitical concerns.

“The bottom line is we will proceed but we will proceed carefully as we learn more about the implications of the Ukraine war,” Powell told the House Financial Services Committee.

Powell said he supported an interest rate hike of 25 basis points after the Fed’s March meeting, affirming market expectations that the central bank would steer away from a more aggressive 50 basis point rate hike given the uncertain geopolitical backdrop.

10:50 a.m. ET: Weekly mortgage applications drop for fourth straight week as interest rates rise

U.S. mortgage applications declined for a fourth consecutive week last week, with applications for both refinances and purchases sliding compared to the same period last year amid rising benchmark rates.

The Mortgage Banker Association (MBA) said Wednesday that weekly mortgage application volume declined by 0.7% during the week ended Feb. 25. This followed a 13.1% plunge during the prior week.

An index tracking refinances rose by 1% compared to the previous week, but still held 56% lower compared to the same period last year. And while purchases also rose slightly on a seasonally unadjusted basis, purchases were also still down by 9% over last year.

“Mortgage rates last week reached multi-year highs, putting a damper on applications activity. The 30-year fixed rate reached its highest level since 2019 at 4.15%, and the refinance share of applications dipped below 50%. Although there was an increase in government refinance applications, higher rates continue to push potential refinance borrowers out of the market,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a press statement.

“Purchase activity remained weak, but the average loan size increased again, which indicates that home-price growth remains strong, and a greater share of the activity is occurring at the higher end of the market,” Kan added.

9:32 a.m. ET: Stocks rise, Dow gains 150+ points

Here’s where markets were trading Wednesday morning:

  • S&P 500 (^GSPC): +22.59 (+0.52%) to 4,328.85

  • Dow (^DJI): +191.00 (+0.57%) to 33,486.06

  • Nasdaq (^IXIC): +51.38 (+0.36%) to 13,575.82

  • Crude (CL=F): +$6.96 (+6.7%) to $110.37 a barrel

  • Gold (GC=F): -$13.60 (-0.7%) to $1,930.20 per ounce

  • 10-year Treasury (^TNX): +7.8 bps to yield 1.789%

8:58 a.m. ET: Powell reiterates Fed expects ‘it will be appropriate to raise the target range for the federal funds rate’ following March meeting

Federal Reserve Chair Jerome Powell, in prepared remarks before the House Financials Services Committee on Wednesday, doubled down on the Fed’s timeline to begin raising interest rates in March even as geopolitical concerns roil financial markets.

“Our monetary policy has been adapting to the evolving economic environment, and it will continue to do so. We have phased out our net asset purchases. 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,” according to Powell’s remarks.

Still, Powell also addressed the uncertainty for the global economic landscape introduced following Russia’s invasion in Ukraine.

“The near-term effects on the U.S. economy of the invasion of Ukraine, the ongoing war, the sanctions, and of events to come, remain highly uncertain,” Powell said. “Making appropriate monetary policy in this environment requires a recognition that the economy evolves in unexpected ways. We will need to be nimble in responding to incoming data and the evolving outlook.”

8:23 a.m. ET: Private payrolls rose by 475,000 in February, handily exceeding estimates: ADP

Private sector employment expanded much more than expected in February while January’s payroll gains were upwardly revised, signaling ongoing strength in the labor market even in the face of Omicron-related disruptions.

ADP said Wednesday that private payrolls grew by 475,000 in February, coming in 100,000 greater than consensus economists were expecting, based on Bloomberg data. And January’s private payrolls were upwardly revised to show a gain, whereas a drop in employment had been previously reported. Payrolls grew by 509,000 in the private sector in the first month of 2022, ADP said Wednesday, versus the drop of 301,000 payrolls reported previously.

8:02 a.m. ET: Ford shares rise after company announces plans to separate electric vehicle business from internal combustion unit

Shares of Ford (F) rose by about 5% Wednesday morning after the automaker announced plans to separate its electric vehicle and legacy internal combustion businesses into two separate units. The move confirmed reporting from Reuters from earlier this week.

The internal combustion engine business unit will be known as “Ford Blue,” while the newly designated electric vehicle unit will be called “Ford Model e.”

The latter “will accelerate innovation and delivery of breakthrough electric vehicles at scale, and develop software and connected vehicle technologies and services for all of Ford,” the company said in a statement. Ford has said it plans to reach annual production of more than 2 million electric vehicles by 2026, helping to capitalize on a growing market as Ford expects electric vehicles to comprise more than half of global volume by 2030.

7:30 a.m. ET Wednesday: Stock futures point to a higher open

Here’s where markets were trading Wednesday morning:

  • S&P 500 futures (ES=F): +32 points (+0.74%), to 4,335.75

  • Dow futures (YM=F): +244 points (+0.73%), to 33,511.00

  • Nasdaq futures (NQ=F): +113.25 points (+0.81%) to 14,118.75

  • Crude (CL=F): +$5.36 (+5.18%) to $108.77 a barrel

  • Gold (GC=F): -$15.50 (-0.80%) to $1,928.30 per ounce

  • 10-year Treasury (^TNX): +5.4 bps to yield 1.765%

6:12 p.m. ET Tuesday: Stock futures rise as investors eye Russia’s war in Ukraine, await Powell

Here were the main moves in markets Tuesday evening:

  • S&P 500 futures (ES=F): +4.25 points (+0.1%), to 4,308.00

  • Dow futures (YM=F): +45 points (+0.14%), to 33,312.00

  • Nasdaq futures (NQ=F): +10.5 points (+0.07%) to 14,016.00

NEW YORK, NEW YORK – FEBRUARY 28: Traders work on the floor of the New York Stock Exchange (NYSE) after New York City Mayor Eric Adams rang the Opening Bell at the New York Stock Exchange (NYSE) on February 28, 2022 in New York, New York. Stocks plunged over 400 points as investors continue to weigh the situation in Ukraine as Russia continues its invasion of the nation. (Photo by Spencer Platt/Getty Images)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter

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