Mid-day: Stocks up on ceasefire optimism, while Treasury market stokes recession concerns

The stock market is keying off momentum and reported progress in ceasefire talks, but recession concerns in the Treasury market have tempered risk sentiment. The S&P 500 is currently up 0.6% after being up 1.1% intraday.

The Dow Jones Industrial Average is up 0.4% while the Nasdaq Composite (+1.2%) and Russell 2000 (+1.8%) are both up more than 1.0%.

Briefly, media reports indicate that Russia has 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. The reported breakthrough comes after both sides held the first face-to-face talks in over two weeks today.

The news has sparked selling in commodities like oil ($101.86/bbl, -4.10, -3.9%), natural gas ($5.38/MMBtu, -0.11, -3.1%), wheat ($10.09/BU, -0.48, -4.6%), and gold ($1912.20/ozt, -27.60, -1.4%), which have eased inflation fears, even as U.S. officials continue to express doubts about Russia’s intentions.

Likewise, eight of the 11 S&P 500 sectors are trading higher, led by the consumer discretionary (+1.1%), communication services (+1.1%), and real estate (+1.7%) sectors with gains over 1.0%. The energy sector is by far the weakest performer with a 1.8% decline amid the lower oil prices.

The Treasury market, meanwhile, is flashing recession concerns via curve-flattening and inversion activity. The 2-yr yield has risen five basis points to 2.39%, while the 10-yr yield has dropped seven basis points to 2.41% – a spread of just two basis points. The 5-yr yield (2.51%) is trading above the 30-yr yield (2.50%), denoting an inversion.

An inversion of the 2s10s spread, specifically, is typically viewed as a harbinger for a recession between six and 24 months after the inversion, although stocks tend to outperform in the months leading into the recession. Concerns about a Fed policy mistake are at the root of these concerns.

Understandably, market participants will continue to watch this spread closely today.

The U.S. Dollar Index has fallen 0.7% to 98.40 amid strength in the euro, which is up 0.9% to 1.1085 on the prospect for a ceasefire. The Europe Stoxx 600 rose 1.6% on Tuesday.

Reviewing today’s economic data:

  • The Conference Board’s Consumer Confidence Index rose to 107.2 in March (Briefing.com 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 (Briefing.com consensus 1.3%), and the S&P Case-Shiller Home Price Index for February increased 19.1% yr/yr (Briefing.com consensus 18.7%).