The S&P 500 rose 2.1% on Tuesday, providing investors relief as oil prices extended their pullback and PPI data for February was better than feared. The Nasdaq Composite gained 2.9%, the Dow Jones Industrial Average gained 1.8%, and the Russell 2000 gained 1.4%.
Stocks that have been the hardest hit this year saw the biggest gains today, particularly the large growth stocks within the S&P 500 information technology (+3.4%) and consumer discretionary (+3.4%) sectors. The energy sector (-3.7%) was the only sector that closed lower, losing 3.7% amid the drop in oil prices.
Crude futures fell 6.5%, or $6.66, to $96.16/bbl, as growth concerns lingered due to China’s recent COVID-19 lockdowns. The stock market, however, overlooked the growth-concern aspect, perhaps because it welcomed the 26% retracement in oil prices since last week’s highs, or because it was simply primed for a bounce.
The positive surprises in the inflation data helped, too, while the airline stocks rallied around higher Q1 revenue guidance from Delta ( DAL 34.86, +2.79, +8.7%), United ( UAL 38.24, +3.22, +9.2%), and Southwest ( LUV 42.06, +1.96, +4.9%).
Some caveats include a recognition that the Producer Price Index for final demand was up 10.0% year-over-year – softening the surprise that it was up 0.8% month-over-month, versus the Briefing.com consensus of 1.0% – and that the airlines are still expecting revenue below pre-pandemic levels.
Treasury yields dipped in the wake of the PPI data, but they turned positive late in the session as stocks pushed towards session highs. There wasn’t any specific catalyst behind the moves, leading some to speculate that the stock market might have been frontrunning a positive reaction to the FOMC decision tomorrow.
The 2-yr yield increased two basis points to 1.86% after touching 1.79% intraday, and the 10-yr yield increased two basis points to 2.16% after touching 2.08% intraday. The U.S. Dollar Index was little changed at 98.99.
On Russia-Ukraine, the headlines didn’t seem to get worse, which was a relatively good thing. On a related note, Ukraine President Zelensky will address the U.S. Congress tomorrow at 9:00 a.m. ET, and President Biden will travel to Europe next week to attend a NATO summit on March 24.
Separately, Coupa Software ( COUP 72.55, -17.27, -19.2%) was the latest growth stock that suffered a material decline after providing disappointing guidance.
Reviewing Tuesday’s economic data:
- The Producer Price Index for final demand increased 0.8% month-over-month in February (Briefing.com consensus +1.0%) following an upwardly revised 1.2% increase (from 1.0%) in January. The index for final demand, less foods and energy, rose 0.2% month-over-month (Briefing.com consensus +0.6%) following an upwardly revised 1.0% increase (from 0.8%) in January. On a year-over-year basis, the index for final demand was up 10.0% on an unadjusted basis while the index for final demand, less foods and energy, was up 8.4%.
- The key takeaway is that we already know that consumers are being dealt the rising costs for producers; moreover, with the index for processed goods for intermediate demand increasing 1.6% month-over-month in February and the index for unprocessed goods for intermediate demand increasing 14.6% month-over-month, we already know that producers aren’t going to see much, if any, cost relief in March.
- The Empire State Manufacturing Survey for March dropped to -11.8 (Briefing.com consensus 9.0) from 3.1 in February.
Looking ahead to Wednesday, investors will receive the FOMC Rate Decision, Retail Sales for February, Import/Export Prices for February, the NAHB Housing Market Index for March, Business Inventories for January, and the weekly MBA Mortgage Applications Index.
- Dow Jones Industrial Average -7.7% YTD
- S&P 500 -10.6% YTD
- Russell 2000 -12.3% YTD
- Nasdaq Composite -17.2% YTD
Overseas:
- Europe: DAX -0.1%, FTSE -0.3%, CAC -0.2%
- Asia: Nikkei +0.2%, Hang Seng -5.7%, Shanghai -5.0%
Commodities:
- Crude Oil -6.66 @ 96.16
- Nat Gas -0.08 @ 4.61
- Gold -35.30 @ 1926.60
- Silver -0.15 @ 25.15
- Copper -0.03 @ 4.50