Close: Small caps pace Tuesday rally

The S&P 500 rose 1.2% on Tuesday, as reported progress in peace talks helped keep the positive momentum intact despite a key inversion in the Treasury market. The Nasdaq Composite (+1.8%) and Russell 2000 (+2.7%) outperformed the benchmark index while the Dow Jones Industrial Average rose 1.0%.

The positive start was catalyzed by news that Russia agreed to reduce military operations near Kyiv and that it’s willing to speed up the timeline for a meeting between Presidents Putin and Zelensky. President Biden and European leaders were more skeptical, with Mr. Biden saying they were going to wait and see for what Russia does instead of believing its words.

The stock market took the reports at face value, using the news as a good excuse to maintain its rebound-minded intentions. Shares of Apple (AAPL 178.96, +3.36, +1.9%) rose for the 11th straight session, and ten of the 11 S&P 500 sectors finished in positive territory.

The heavily-weighted information technology (+2.1%) and consumer discretionary (+1.5%) sectors were among the top performers behind the real estate sector (+2.9%), while the energy sector (-0.4%) bucked the positive trend amid a decline in oil prices ($104.33, -2.14, -2.0%).

Oil, like other commodities and the dollar (98.41, -0.68, -0.7%), was pressured by the prospects of a ceasefire agreement. The dollar weakened against a stronger euro (+0.9% to 1.1088).

Elsewhere, a widely-followed recession indicator in the Treasury market briefly flashed red for the first time since 2019. Specifically, the 2-yr yield (+1 bps to 2.35%) briefly traded higher than the 10-yr yield (-8 bps to 2.40%), which is typically viewed as a harbinger for a recession between 6-24 months after the inversion.

Bullish investors noted that equities tend to rally in the months between the inversion and recession while others downplayed the significance of the indicator, arguing that the Fed’s policy accommodation has distorted the long-end of the curve.

On a related note, Philadelphia Fed President Harker (non-voter in FOMC) told CNBC that an inversion of the yield curve has mixed evidence regarding recession indicators. Former New York Fed President Dudley opined in a Bloomberg piece that a recession is “virtually inevitable” because the Fed is behind the curve.

Reviewing Tuesday’s economic data:

  • The Conference Board’s Consumer Confidence Index rose to 107.2 in March ( consensus 107.5) from a downwardly revised 105.7 (from 110.5) in February. In the same period a year ago, the index stood at 109.0.
  • The key takeaway from the report is that consumers benefited from continued growth in late Q1, though expectations for the near future continued weakening, which has the potential to pressure future spending plans.
  • Job openings decreased to 11.266 million in February from a revised 11.283 million (from 11.263 million) in January.
  • The FHFA Housing Price Index for February increased 1.6% m/m ( consensus 1.3%), and the S&P Case-Shiller Home Price Index for February increased 19.1% yr/yr ( consensus 18.7%).

Looking ahead, investors will receive the third estimate for Q4 GDP, the ADP Employment Change report for March, and the weekly MBA Mortgage Applications Index on Wednesday.

  • S&P 500 -2.8% YTD
  • Dow Jones Industrial Average -2.9% YTD
  • Russell 2000 -5.0% YTD
  • Nasdaq Composite -6.6% YTD


  • Europe: DAX +2.8%, FTSE +0.9%, CAC +3.1%
  • Asia: Nikkei +1.1%, Hang Seng +1.0%, Shanghai -0.3%


  • Crude Oil -2.14 @ 104.33
  • Nat Gas -0.20 @ 5.35
  • Gold -17.80 @ 1914.40
  • Silver -0.29 @ 24.79
  • Copper +0.02 @ 4.74