Bulls got a boost on Tuesday following reports that Russian military forces were moved from the border with Ukraine, states Jon Markman, editor of Strategic Advantage.
The benchmark S&P 500 (SPX) opened strong and rallied all the way into the closing bell to finish at 4,471, a gain of 1.6%.
The rally retakes the 200-day moving average, which is good. However, bulls still need to work through more formidable resistance at 4,500 and 4,610. That advance may be a tall order with interest rates climbing higher.
The yield for the ten-year Treasury bond jumped to 2.04% on Tuesday after the January producer price index advanced 1% year-over-year. The PPI annualized rate of growth is now 9.7%, which is kind of mind-blowing.
The bottom line is that the trading range for the benchmark persists. The bottom of that range is still 4,222.
The Upshot
Stocks snapped a three-day losing streak after Russia said it pulled back some of the troops massed near its borders with Ukraine.
The Nasdaq (NDAQ) rose 2.5% to 14,139.76 and the Dow (DOW) jumped 1.2% to 34,988.84. Technology-led the broad gains, with only the energy and utilities sectors in the red.
Breadth favored decliners seven-one, and there were 53 new highs vs 311 new lows. Big caps on the new high list included AbbVie (ABBV), Phillip Morris (PM), Marriot International (MAR), Expedia Group (EXPE), and Telus Group (TU). Drugs, cigarettes, and travel—not exactly a risk-on cohort but we'll take it.
West Texas Intermediate crude oil pulled back 3.8% to $91.88 a barrel. The ten-year US Treasury yield jumped five basis points to 2.05%. Gold for April delivery dropped 0.8% to $1,853.70 per troy ounce.
Gold prices surged to the highest since mid-November on Monday as geopolitical tensions rose between the European neighbors. But after meetings in Moscow between President Putin and German Chancellor Olaf Scholz, Russia reportedly said it could be more open to diplomatic talks.
A Russian ministry spokesman reportedly said in a video published online some units of the country's Southern and Western military districts have finished their drills and started returning to base, according to a Reuters report.
Meanwhile, Ukraine said its defense ministry and two banks were hacked on Tuesday, while the West demanded proof of a partial troop pullback from Russia, Reuters said in a separate report.
In the afternoon, President Joe Biden addressed Russian citizens in a speech from the White House, saying the US and its allies are not a threat to them and that there is "plenty" of room for diplomacy with Russia, CNN reported.
In economic news, the US producer price index rose 1% in January following a revised 0.4% increase in December, ahead of the 0.5% gain expected in a Bloomberg survey.
The Empire State index, the first manufacturing reading for February, rose to 3.1 after falling to -0.7 in January, indicating modest expansion for New York industry. The Philadelphia Fed's manufacturing reading will be released Thursday.
Redbook reported US same-store retail sales were up 15.4% year-over-year in the week ended February 12, ahead of the 13.3% gain in the prior week. That’s great to hear.
In company news, NVIDIA (NVDA) said it will host its GTC 2022 conference from March 21-24. The leading graphics processors provider is scheduled to report fiscal fourth-quarter results today. Shares were up 9.2%, among the top gains in the S&P 500.
Shares of Intuit (INTU) slipped 0.2% after the tax preparation software provider cut its fiscal second-quarter revenue outlook, citing "the slow forming tax season." Its sales projections lagged the market forecast.
Boeing (BA) said it received three five-year contracts from South Korea's Defense Acquisition Program Administration to provide logistics services to the Korean Air Force. Shares rose 3.7%, among the biggest gains in the Dow.
Data Junkie Update: Extreme Bondage
Stocks and commercial and government bonds have both pulled back 5% from their highs, a rare event. The analysts at SentimenTrader report this is only the seventh time since 1976 that both major markets have clanked to this degree at the same time. Usually bonds go up when stocks go down.
Turns out that this extreme behavior tends to result over time into strong rebounds, led by bonds, according to ST analysis.
On Monday, high-yield bonds endured their worst selling in more than a month, on par with some of the worst declines in 15 years. But it’s not just junk bonds—SPDR Bloomberg High-Yield Bond ETF (JNK)—that are being sold, but also investment-grade bonds (LQD), Treasuries (TLT), and municipals.
Starting late last week, the total return in the S&P 500 and Bloomberg US Aggregate Bond Index were both more than 5% off their highs. Investors have endured a dual pullback only a handful of times in the past 46 years, the ST research shows.
The analysts believe these unusual dual pullbacks have been a good sign that whatever macro concerns were driving the selling...was mostly overdone. Research shows that the S&P 500 did suffer some losses in the months ahead, especially in 2008 as the final bout of panic hit markets. But over the next year, there was only a single small loss, which was quickly and dramatically reversed.
The signal: The S&P 500 and Bloomberg bond index are both more than 5% down from a one-year high. The results going forward: S&P 500 was up 3.8% on average in the next month, 8.6% in three months, 15.6% in 9 months and 23.4% in a year.…The most recent instance was March 18, 2020, and the S&P was up 20% in the next month, 42.5% in six months, and 66% in a year, according to the ST data.
Also, the Bloomberg US Bond Aggregate was up every time from nine months forward and beyond, which is a result well above random.
SentimenTrader Analysts’ Conclusion: The dual pullback in stocks and bonds smacks of wholesale, excessive selling pressure that is due in part to emotional anxiety. After similar behavior, assets had a strong tendency to rebound, bonds most of all.
