4:05pm: US equities close higher for third-straight day
US stocks closed higher for a third-straight day as investors digested the latest news out of Ukraine and came to terms with the outcome of the Federal Reserve meeting.
The moves come after a massive two-day rally for stocks. The S&P 500 jumped more than 3% in the previous two sessions, while the Dow posted back-to-back surges of more than 500 points.
The Fed meeting ended up being a non-event for the market, which seems to mark a positive turning point for investors despite the uncertainty in the Russia-Ukraine war.
On the day, the Dow increased 405 points, or 1.20%, to 34,476 and the S&P 500 rose 1.20% to 4,411. The tech-heavy Nasdaq rose 1.22% to 13,614.
12.15pm: Markets volatile amid geopolitical concerns
US stocks continued to be volatile midday Thursday, edging up after paring back gains made earlier this week as the Kremlin denies substantial progress in Russia-Ukraine peace talks, while the Fed begins its aggressive tightening cycle.
At noon, the Dow Jones Industrial Average added 0.2%, or 62 points, at 34,125, while the Nasdaq Composite was flat, and the S&P 500 gained 0.2%.
“As ever, we need to take commentary coming from the Kremlin with a pinch of salt, both good and bad, but the latest comments have come as a blow to the markets,” said Craig Erlam, senior market analyst, UK & EMEA, OANDA.
“We've seen cautious optimism building in the markets this week as the two sides appeared to be making progress, even if it was occurring against the backdrop of more horrific Russian attacks in Ukraine,” he added.
The Fed meeting on Wednesday was a rarity, in that the central bank quickly conformed to the market's way of thinking after months of pushback, Erlam noted. The Fed now sees six more rate hikes this year, on top of the one announced yesterday, representing a 25 basis point increase at every meeting for the rest of 2022.
“And with a large minority forecasting even higher rates by year-end, the chance of a 50 basis point hike at a meeting has certainly increased,” Erlam said. “The rhetoric from Chair Powell and his reference to the labor market being tight to an unhealthy level further supports the view that the rate of increases this year will be substantial.”
Among the corporate movers, shares of American Express were up 2.3%, while Netflix shares jumped 2% Thursday.
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10.15am: Stocks in the green
US stocks rose modestly on Thursday albeit in volatile trading having opened lower after the Federal Reserve raised interest rates on Wednesday, while investors closely monitored developments in the Ukraine war.
After around 45 minutes of trading, the Dow Jones Industrial Average was flat at 34,087, while the S&P 500 was up by 0.2%, and the Nasdaq Composite gained 0.1%.
The mixed trend came as the Kremlin dismissed reports of progress in peace talks with Ukraine Thursday, according to Bloomberg.
After the as-expected Fed rate rise in the previous session, traders had a batch of data to examine on Thursday.
The latest US weeklu jobless claims fell to 214,000, below the consensus of 220,000 and lower by 15,000 than in the previous week.
Meanwhile the Philly Fed index – a key measure to evaluate regional manufacturing growth – jumped to 27.4 last month from 16.0, nearly doubling the consensus of 14.5.
“The leap in the Philly Fed is a big surprise, after the sharp drop in the Empire State index,” said Ian Shepherdson, chief economist, Pantheon Macroeconomics. “The jump in the headline to a four-month high is reflected in hefty increases in new orders, shipments, employment, and the workweek.”
He noted that the bad news was that measures of supply chain pressures deteriorated, with unfilled orders and delivery times rising; the latter jumped 16.7 points to a 10-month high.
“We don’t know yet if this a knee-jerk response to the war in Ukraine, or is a sign that China’s anti-Covid measures are triggering renewed disruptions, or both, but it is an unwelcome development either way," the economist added.
6.30am: US stocks set to open lower
US stocks are expected to open lower on Thursday after Wednesday’s rally on the back of the Federal Reserve’s quarter-point hike in its benchmark interest rate, with the Russia/Ukraine conflict still in focus.
Futures for the Dow Jones Industrial Average shed around 0.3%, while those for the broader S&P 500 index also fell 0.3% and contracts for the tech-heavy Nasdaq-100 were down 0.4%.
The Fed’s rate hike – the first since 2018 – was broadly expected and officials have signaled more rate increases in 2022, coming at each of its remaining six policy meetings for the year, in a move investors see as an aggressive approach towards curbing surging prices.
Neil Wilson, chief market analyst for Markets.com said: "The Fed thinks they can tighten without impacting the labour too much – I tend to agree. Tightening will impact Wall Street more than Main Street at this point … further down the line is harder to call (as) it could lead to recession. Another thing is that getting inflation under control is job one to scotch the ‘stagflation’ chatter. It was noteworthy that in a response to whether the Fed would be prepared to take the path it did under Paul Volcker and do whatever it takes to get inflation under control, Powell responded in the affirmative. I think the urgency is at last there, very late, and the market kind of liked that."
Markets had started to rebound after coming under pressure from the Russia-Ukraine conflict and surging energy prices as a result of uncertainty over Western sanctions on Russia and how global central banks would react to the war.
Commenting on the Ukraine situation, Wilson said: "Headlines aplenty coming out of Ukraine-Russia peace talks – FT headline yesterday pointing to a 15-point peace plan saw risk catch bid yesterday afternoon, but subsequent headlines and responses were a lot sketchier. Putin reiterated that Russia will achieve all its tasks but is ready for talks, but Lavrov was suggesting the two sides were nearing consensus on wording. We need to monitor. Oil prices are a bit higher this morning after sliding for most of yesterday. "
"There was a nod to Ukraine, saying the invasion will likely create “additional upward pressure on inflation and weigh on economic activity”, but there is no sense that the FOMC is slowing down because of it," he added.
The market’s focus has turned to the resumption of cease-fire talks between Russia and Ukraine and as investors continue to digest the Fed’s latest statement. Analysts see the S&P 500 heading for its best weekly performance in over three months.
However, sentiment in commodity markets continues to show signs of stress from the Russia-Ukraine conflict, with oil prices rising and Brent crude adding 3.2% to trade at $101.12 a barrel.
Contact author at jon.hopkins@proactiveinvestors.com