Stocks Rise On Ukraine Optimism And China’s Pledge To Support Markets

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The S&P 500 Index ($SPX) (SPY) this morning is up +1.40%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +1.05%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.98%.

U.S. stock indexes this morning are moderately higher, with the S&P 500 and Dow Jones Industrials posting 1-1/2 week highs and the Nasdaq 100 climbing to a 1-week high. Positive developments in talks between Russia and Ukraine are fueling gains in stocks after Russia’s chief negotiator reported “some progress” in the negotiations. Also, there is positive-carry-over from a surge in Chinese stocks today after China vowed policies to spur economic growth and boost its financial markets. Today’s U.S. economic data was weaker than expected and was bearish for stocks.

The 10-year T-note yield climbed to a 2-3/4 year high today of 2.201%, ahead of the results of the FOMC this afternoon.  The market fully expects the Fed today to raise the federal funds rate target range by 25 bp.  The FOMC will also release a statement and updated economic forecasts, including projections on interest rates.  Fed Chair Powell will also hold a virtual press conference.

U.S. Feb retail sales rose +0.3% m/m and +0.2% m/m ex-autos, weaker than expectations of +0.4% m/m and +0.9% m/m ex-autos.

The U.S. import price index ex-petroleum rose +0.7% m/m, weaker than expectations of +0.8% m/m.

The U.S. Mar NAHB housing market index fell -2 to a 6-month low of 79, weaker than expectations of 81.

The 7-day average of new U.S. Covid infections Tuesday fell to an 8-month low of 31,098.

Today’s stock movers…

U.S.-listed casino operators with exposure to Macau moved higher in pre-market trading after the pledge from the Chinese government to keep capital markets stable.  Melco Resorts & Entertainment (MLCO) is up more than +11%, Las Vegas Sands (LVS) is up more than +7%, Wynn Resorts (WYNN) is up more than +6%, and MGM Resorts International (MGM) is up more than +3%.

U.S.-listed Chinese stocks are soaring today after the Chinese government vowed to keep the stock market stable and support overseas share listings.  Pinduoduo (PDD) is up more than +30% to lead gainers in the Nasdaq 100.  JD.com (JD) is up more than +20%, Baidu (BIDU) and Alibaba Group Holding (BABA) are up more than +14%, and NetEase (NTES) is up more than +13%.

Electric vehicle makers are moving higher today after Chinese automaker BYD followed Tesla in raising car prices due to soaring raw material costs.  Rivian Automotive (RIVN) is up more than +8%, Nikola (NKLA) is up more than +6%, Lucid Group (LCID) is up more than +4%, and Tesla (TSLA) is up more than +2%.

Starbucks (SBUX) is up more than +6% today after it said CEO Keven Johnson plans to retire next month and founder Howard Schultz will be interim CEO.

Micron Technology (MU) is up more than +7% today after Bernstein raised its recommendation on the stock to outperform from market perform.

NortonLifeLock (NLOK) is down more than -6% today to lead losers in the S&P 500 after U.K. regulators warned that the firm’s proposed takeover of Avast Plc risks reducing competition for cyber security software.

Lockheed Martin (LMT) is down more than -4% today after the U.S. Defense Department said it would seek only 61 F-35 jets in its budget, 33 fewer than previously planned.

Across the markets…

June 10-year T-notes (ZNM22) this morning are down -7 ticks, and the 10-year T-note yield is up +2.5 bp at 2.169%.  T-notes tumbled to a new 2-3/4 year low today, and the 10-year T-note yield rose to a new 2-3/4 year high of 2.201%.  A jump in the German 10-year bund yield to a 3-1/4 year high today of 0.400% is pressuring T-notes along with a rally in stocks, which curbs safe-haven demand for T-notes.  In addition, the outlook for the Fed later today to begin a new tightening cycle by raising the fed funds target range by 25 bp is weighing on T-note prices.

The dollar index (DXY00) this morning is down -0.43%.  The dollar index is under pressure on strength in EUR/USD after Russia hinted at progress in peace talks with Ukraine.  The dollar also fell on weaker than expected U.S. economic data on Feb retail sales and the Mar NAHB housing market index.

EUR/USD (^EURUSD) this morning is up +0.38%.  EUR/USD is climbing today amid some hopes of a compromise between Russia and Ukraine.  Russian spokesman Peskov said today that a Ukrainian proposal to become a neutral country but retain its own armed forces “could be viewed as a certain kind of compromise.”

USD/JPY (^USDJPY) this morning is unchanged.  USD/JPY today is consolidating just below Tuesday’s 5-year high. Strength in stocks today has reduced safe-haven demand for the yen.  The yen was also under pressure after today’s trade data showed Japan Feb exports rose +19.1% y/y, weaker than expectations of +20.6% y/y.  However, the yen found support on the outlook for pandemic restrictions to end after the Sankei newspaper reported that the Japanese government plans to lift Covid emergency measures in Tokyo and 15 other prefectures when they expire on March 21.

April gold (GCJ22) this morning is down -9.6 (-0.50%), and May silver (SIK22) is down -0.128 (-0.51%).  Precious metals prices this morning are moderately lower but remain above Tuesday’s 2-week lows.  Strength in stocks today is reducing the safe-haven demand for precious metals.  Gold prices are also under pressure from soaring government bond yields as the 10-year German bund yield climbed to a 3-1/4 year high today, and the 10-year T-note yield jumped to a 2-3/4 year high. Expectations for the Fed today to hike interest rates today is another bearish factor for metals prices.

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