Mid-day: The market gets its hopes up

The S&P 500 is up 1.7% in midday action, as the market hopes for a reprieve in the Russia-Ukraine conflict and for the Fed to be less aggressive when removing policy accommodation.

Relative to the benchmark index, the Dow Jones Industrial Average (+1.7%) is performing in-line, the Russell 2000 (+2.2%) is outperforming, and the Nasdaq Composite (+1.1%) is underperforming.

All 11 S&P 500 sectors are trading higher, paced by the cyclical financials (+2.9%), energy (+2.5%), industrials (+2.2%), and materials (+2.2%) sectors with gains over 2.0%. The information technology sector (+2.0%) is up there, too, while the communication services sector trails with a 0.7% gain.

On the seventh day of Russia’s invasion of Ukraine, reports are indicating that Russian foreign minister Lavrov is ready to discuss security guarantees with Ukraine at their upcoming talks. Ukraine has put forth a stronger-than-expected resistance against Russian military forces.

Because of the uncertainty of the situation, Fed Chair Powell told the House Financial Services Committee today that he thinks the Fed will “proceed carefully.” Mr. Powell also said he supports a quarter-point hike this month, although he acknowledged that there’s still a possibility for a half-point hike in the future if inflation is higher than expected.

While oil prices continue to rise to uncomfortable levels near $110 per barrel ($109.31/bbl, +5.90, +5.8%), investors are feeling a little better about growth prospects. That’s evident not only in the outperformance of the cyclical stocks, but also in the snapback in Treasury yields.

The 10-yr yield is up 12 basis points to 1.83%, and the 2-yr yield is up 19 basis points to 1.49%. The U.S. Dollar Index is up 0.2% to 97.62.

Other supportive factors include a better-than-expected ADP Employment Change report for February and better-than-expected earnings reports from salesforce.com ( CRM 210.45, +1.62, +0.8%), Nordstrom ( JWN 26.96, +7.44, +38.1%), Ross Stores ( ROST 96.27, +6.72, +7.5%), and Hewlett Packard Enterprises ( HPE 17.13, +1.71, +11.2%).

Reviewing today’s economic data:

  • The ADP Employment Change report estimated that 475,000 jobs were added to private sector payrolls in February (Briefing.com consensus 350,000). The increase in January was upwardly revised to 509,000 from -301,000.
  • The EIA reported a 2.6 million draw in weekly crude inventories.
  • The weekly MBA Mortgage Applications Index decreased 0.7% following a 13.1% decline in the prior week.