Wall Street surges as easing geopolitical worries fuel broad rally

By Stephen Culp

NEW YORK (Reuters) – Wall Street ended sharply higher on Tuesday, as signs of de-escalating tensions along the Russia-Ukraine border sparked a risk-on session.

All three major indexes notched solid advances on the day, with market leading tech and tech-adjacent stocks providing the biggest boost and putting the Nasdaq, which gained 2.5%, out front.

The Philadelphia SE Semiconductor index jumped 5.5% in its largest one-day percentage gain since March 2021.

Geopolitical heat was turned down a notch after Russia said it had withdrawn some of its troops near the Ukraine border, prompting bullish equities sentiment and causing crude prices to slide on easing supply concerns. [O/R]

The announcement received guarded responses, and the United States and NATO said they had yet to see evidence of a drawdown.

Stocks briefly pared gains late in the session, when U.S. President Joe Biden said that while diplomatic efforts are ongoing.

“Nice rally today, thanks to (Russian President Vladimir) Putin,” said David Carter, managing director at Wealthspire Advisors in New York.

“Markets have been moving based on Putin or (Federal Reserve Chairman Jerome) Powell,” Carter added. “Putin and his intentions with Ukraine and Powell and his intentions regarding interest rates.”

The CBOE market volatility index backed down from a three-week high.

On the economic front, a report from the Labor Department showed producer prices surged in January at twice the expected rate, reinforcing economist expectations that the Federal Reserve will take on stubbornly persistent inflation by aggressively hiking key interest rates.

“Inflation data suggests prices are rising, but markets already knew this,” Carter said.

The graphic below shows producer price index (PPI) data, along with other major indicators, and how far they have risen beyond the Fed’s average annual 2% inflation target:

GRAPHIC: Inflation – https://globalrubbermarkets.com/wp-content/uploads/2024/08/wall-street-surges-as-easing-geopolitical-worries-fuel-broad-rally.png

The market has now priced in better than even odds that the central bank will raise the Fed funds target rate by 50 basis points at its March monetary policy meeting.

“The market is now priced for a more aggressive Fed, and outside of geopolitics there’s reduced uncertainty,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. “But the market is never certain so you always dealing probabilities.”

The Dow Jones Industrial Average rose 422.67 points, or 1.22%, to 34,988.84, the S&P 500 gained 69.4 points, or 1.58%, to 4,471.07 and the Nasdaq Composite added 348.84 points, or 2.53%, to 14,139.76.

Nine of the 11 major sectors in the S&P 500 closed green, with tech shares enjoying the largest percentage gain, jumping 2.7%. Energy stocks, weighed by sliding crude prices, fell 1.4%.

Fourth quarter reporting season is entering its last stretch, with 370 of the companies in the S&P 500 having reported. Of those, 78.1% have beaten analyst estimates, according to preliminary Refinitiv data.

“It’s nice to have that earnings strength underlying these macro issues,” Mayfield added.

The Philadelphia SE Semiconductor index’s surge followed Intel Corp (NASDAQ:INTC)’s announcement of a $5.4 billion deal to buy Israeli chipmaker Tower Semiconductor (NASDAQ:TSEM).

Restaurant Brands International (NYSE:QSR) rose 3.6% after the fast food operator beat quarterly profit and revenue estimates.

Hotelier Marriott International (NASDAQ:MAR) also beat Wall Street expectations due to rising occupancy rates, sending its shares up 5.8%.

Other travel-related companies surged, with the S&P 1500 airlines index and hotels/restaurants/leisure index rising 5.9% and 2.4%, respectively.

Shares of cloud infrastructure company Arista Networks (NYSE:ANET) jumped 5.8% after it forecast better-than-anticipated current quarter revenue.

Advancing issues outnumbered declining ones on the NYSE by a 3.03-to-1 ratio; on Nasdaq, a 3.87-to-1 ratio favored advancers.

The S&P 500 posted 6 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 39 new highs and 70 new lows.

Volume on U.S. exchanges was 10.63 billion shares, compared with the 12.60 billion average over the last 20 trading days.

Source: Investing.com