Mid-day: Stocks extending gains to a third straight day

The stock market is up for the third straight day, but the gains are relatively small compared to the previous two-day rally. The S&P 500 is up 0.4%, the Nasdaq Composite is up 0.3%, and the Dow Jones Industrial Average is up 0.4%.

Ten of the 11 S&P 500 sectors are trading higher, with the energy sector (+3.1%) rallying behind the 8% gain in oil prices ($102.21, +7.17, +7.7%). The materials (+1.4%) and real estate (+1.2%) sectors are other luminaries, while the heavily-weighted information technology sector (-0.4%) is holding back the market with a modest decline.

Oil prices are rebounding after Russia refuted yesterday’s reports that indicated progress in ceasefire talks. On a related note, Reuters reported that Western officials believe that there remains a big gap between those talks.

Encouragingly, the stock market is absorbing the higher oil prices and geopolitical uncertainty, helped by the positive price momentum borne out of a bearish sentiment. Since Monday’s close, the S&P 500 is now up 5%.

The price action in the Treasury market has provided some reassuring support in that yields are undoing some of yesterday’s flattening action. The 2-yr yield is down four basis points to 1.93%, and the 10-yr yield is down two basis points to 2.16%.

The U.S. Dollar Index is down 0.8% to 97.88 amid strength in the euro, which is up 0.7% against the dollar to 1.1114. The British pound is up 0.1% to 1.3160, recovering prior losses that followed the Bank of England’s decision to increase its key lending rate by 25 basis points to 0.75%.

Separately, investors received a batch of economic data that was mostly better than expected, including housing starts for February, weekly initial claims, and the Philadelphia Fed Index for February.

Providing more specifics on the data:

  • February housing starts increased 6.8% month-over-month to a seasonally adjusted annual rate of 1.769 million (Briefing.com consensus 1.700 million) and building permits slipped 1.9% to a seasonally adjusted annual rate of 1.859 million (Briefing.com consensus 1.860 million).
  • The key takeaway from the report was that single-family units (+5.7%) drove the strength in starts, yet a 0.5% decline in permits for single units (a leading indicator) tempered some of the enthusiasm for the otherwise encouraging February number.
  • Initial jobless claims for the week ending March 12 decreased by 15,000 to 214,000 (Briefing.com consensus 224,000) and continuing claims for the week ending March 5 decreased by 71,000 to 1.419 million, hitting their lowest level since February 21, 1970.
  • The key takeaway from the report is the understanding that the latest week is the week in which the survey for the March employment report was conducted. With the low level of initial claims, expectations for a strong pickup in job growth – and a continuation of the strong labor market the Fed chair was discussing – will remain high.
  • Total industrial production increased 0.5% month-over-month in February (Briefing.com consensus 0.5%) following an unrevised 1.4% increase in January. The capacity utilization rate rose to 77.6% (Briefing.com consensus 77.9%) from a downwardly revised 77.3% (from 77.6%) in January.
  • The key takeaway from the report is that industrial production is being held back by the output of motor vehicles and parts, which stems from ongoing supply shortages. The output of motor vehicles and parts declined 3.5% in February.
  • The Philadelphia Fed Index for March increased to 27.4 (Briefing.com consensus 14.0) from 16.0 in February.