Mid-day: Stocks rally as oil prices drop

The major indices are up between 2.4% (Dow Jones Industrial Average) and 3.6% (Nasdaq Composite) in a rebound rally driven by hopeful-sounding rhetoric on Russia-Ukraine and a 10% pullback in oil prices ($111.30, -12.40, -10.0%).

Nine of the 11 S&P 500 sectors are trading higher, paced by the financials (+4.5%), information technology (+3.9%), and communication services (+3.6%) sectors. The energy (-2.9%) and utilities (-0.4%) sectors are the lone holdouts but still sport nice gains for the month.

While Russia has continued its military offensive, the country’s foreign ministry spokesperson, according to Reuters , said Moscow doesn’t want to overthrow the Kyiv government and that it hopes progress can be made in upcoming talks tomorrow.

According to Bloomberg , an aide to Ukrainian President Zelensky responded that Ukraine is open to neutrality talks, but the country won’t yield a “single inch” of territories.

The market clearly has high expectations for the outcome of tomorrow’s talks, but there’s also been another factor driving oil prices lower. Namely, the UAE is in favor of increasing oil production and will encourage fellow OPEC members to boost production, according to a report from the Financial Times .

The headlines are working in the market’s favor, and the bullish price action has likely pulled in investors wanting to take part of a larger rebound rally. The market, however, has seen similar upswings in this corrective phase, so investors are trying to decipher if the rally is for real or if it’s just the start of another lower high.

Ceasefire talks will play a role in determining the answer to that question, as will the CPI report tomorrow and the Fed’s policy meeting next week. The reaction to those events will be key, too. In other words, time will tell, but the drawdown in oil prices has been encouraging.

The Treasury market has softened up amid the rebound-minded action in equities. The 2-yr yield is up three basis points to 1.66%, and the 10-yr yield is up three basis points to 1.90%. The U.S. Dollar Index is down 1.2% to 97.93 amid strength in the euro (+1.7% to 1.1083).

Reviewing today’s economic data:

  • Job openings decreased to 11.263 million in January from a revised record-high of 11.448 million (from 10.925 million) in December.
  • The weekly MBA Mortgage Applications Index rose 8.5% following a 0.7% decline in the prior week.