The S&P 500 futures trade just three points, or 0.1%, above fair value, although they were trading as low as 2.2% below fair value after Russia declared two territories in eastern Ukraine as independent and ordered deployment of troops into those regions.
President Biden, in response, signed an executive order prohibiting new U.S. investment in the so-called DNR or LNR regions of Ukraine. Mr. Biden also accepted a meeting ‘in principle’ with Russian President Putin late this week if an invasion does not occur.
Based on the resilient price action, there might be hope that diplomacy can still win out or that the market has priced in everything but a Russian invasion. Despite the Russia news, the 10-yr yield is up one basis point to 1.94%, gold futures are down 0.1% to 1898.50/ozt, and the U.S. Dollar Index is down 0.1% to 95.94. WTI crude futures, though, are up 3.1% to $93.06/bbl.
The 2-yr yield is up five basis points to 1.51% as the market continues to expect tighter monetary policy. Fed Governor Bowman (FOMC voter) said she supports a March rate hike in addition to further rate increases in the coming months if the economy evolves as expected.
In other developments, Home Depot ( HD 347.00, +0.13, unch) beat top and bottom-line estimates, the UK announced the remaining domestic restrictions in England will be removed, and Houghton Mifflin Harcourt ( HMHC 20.82, +2.71, +15.0%) agreed be acquired by Veritas Capital for $2.8 billion, or $21.00/share, in cash.
On the data front, investors will receive the FHFA Housing Price Index for December and the S&P Case-Shiller Home Price Index for December (Briefing.com consensus 18.3%) at 9:00 a.m. ET, the preliminary IHS Markit Manufacturing/Services PMIs for February at 9:45 a.m. ET, and the Conference Board’s Consumer Confidence Index for February (Briefing.com consensus 109.0) at 10:00 a.m. ET.
In U.S. Corporate news:
- Home Depot (HD 347.00, +0.13): UNCH despite beating top and bottom-line estimates and approving a 15% increase of its quarterly dividend to $1.90/share.
- Macy’s (M 27.61, +1.91): +7.4% after beating top and bottom-line estimates, guiding FY23 EPS and revenue above consensus, and authorizing a new $2.0 billion share repurchase program.
- Dillard’s (DDS 272.00, +28.31): +11.6% after beating revenue estimates.
- Houghton Mifflin Harcourt (HMHC 20.82, +2.71): +15.0% after agreeing be acquired by Veritas Capital for $2.8 billion, or $21.00/share, in cash.
Reviewing overnight developments:
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Equity indices in the Asia-Pacific region ended Tuesday on a lower note. Japan’s Nikkei: -1.7% Hong Kong’s Hang Seng: -2.7% China’s Shanghai Composite: -1.0% India’s Sensex: -0.7% South Korea’s Kospi: -1.4% Australia’s ASX All Ordinaries: -1.1%.
- In economic data:
- Japan’s December Corporate Services Price Index 1.2% yr/yr (last 1.1%). January BoJ Core CPI 0.8% yr/yr (last 0.9%)
- South Korea’s February Consumer Confidence 103.1 (last 104.4)
- Hong Kong’s January CPI 1.2% yr/yr (expected 1.7%; last 2.4%)
- In news:
- China Securities Journal continued speculating that the People’s Bank of China will lower the reserve requirement ratio, though the urgency of easing has declined after a January increase in the supply of credit.
- China’s Finance Minister Liu said that larger tax and fee cuts will be announced this year.
- The shadow board of the Reserve Bank of New Zealand called for a 25-bps rate hike at the upcoming meeting and substantial tightening during the next year.
- In economic data:
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Major European indices trade just above their flat lines. STOXX Europe 600: +0.1% Germany’s DAX: +0.1% U.K.'s FTSE 100: +0.3% France’s CAC 40: +0.3% Italy’s FTSE MIB: +0.1% Spain’s IBEX 35: +0.4%.
- In economic data:
- Germany’s February ifo Business Climate Index 98.9 (expected 96.5; last 96.0). February Current Assessment 98.6 (expected 96.6; last 96.2) and Business Expectations 99.2 (expected 96.1; last 95.8)
- U.K.'s February CBI Industrial Trends Orders 20 (expected 25; last 24). January Public Sector Net Borrowing -GBP3.65 bln (expected GBP15.22 bln; last GBP16.08 bln)
- Italy’s January CPI 1.6% m/m, as expected (last 0.4%); 4.8% yr/yr, as expected (last 3.9%)
- In news:
- Russian President Putin announced yesterday that Russia will recognize the independence of two separatist regions in Eastern Ukraine.
- German Chancellor Scholz said that the approval process for the Nord Stream 2 pipeline from Russia will be halted and re-assessed in light of recent events.
- Bank of France Governor Villeroy de Galhau said that there is no current need to decide on specific dates for rate hikes and that asset purchases should end around Q3.
- In economic data:
U.S. equity futures:
- S&P 500 Futures: -2 @ 4,347
- DJIA Futures: -33 @ 34,046
- Nasdaq 100 Futures: -63 @ 13,947
Overseas:
- Europe: DAX +0.1%, FTSE +0.3%, CAC +0.3%
- Asia: Nikkei -1.7%, Hang Seng -2.7%, Shanghai Composite -1.0%
Commodities:
- Crude Oil +2.87 @ 93.08
- Nat Gas +0.167 @ 4.544
- Gold +0.80 @ 1900.60
- Silver +0.088 @ 24.080
- Copper +0.0092 @ 4.5287