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Published on 2/25/2022

Published by marketing@concretebroker.com.au

Stocks jump as investors eye strong data, Russia's attacks in Ukraine

Yahoo Finance


 

Cover Photo : Emily McCormick is a reporter for Yahoo Finance. She previously wrote for Bloomberg News in New York and Washington, D.C.

 

Yahoo Finance

Emily McCormick

Emily McCormick

·Reporter

Sat, February 26, 2022, 5:19 AM

Source : yahoo finance

Stocks extended gains Friday as traders eyed the latest developments in Russia's invasion of Ukraine and the world's response.

The S&P 500 advanced more than 1.6%, rising further after a 1.5% jump on Thursday. The Dow and Nasdaq also built on Thursday's gains to add more than 1% intraday on Friday. The move came after new economic data showed U.S. personal spending rose more than expected in January, even accounting for a surge in inflation. Personal consumption expenditures (PCE), a closely watched gauge of inflation, soared by 6.1%, or the fastest rate in 40 years.

Stocks moved higher even against the backdrop of Russia's military attack of Ukraine and Western nation's sanctions on Russia. Though equities have been sliding and energy commodity prices soaring in recent sessions as investors considered the financial market impacts of the conflict, markets at least temporarily stabilized in absence of further evidence of U.S. economic damage.

"The market is going to overreact to good news and bad. The news [Thursday] morning was sell, sell, sell," Allan Boomer, Momentum Advisors chief investment officer, told Yahoo Finance Live on Thursday. "And now we analyzed the news ... I think what the market has decided is that this Ukraine-Russia [situation] is a tragedy, [but] it's not necessarily a global event that's going to cause us to fall into a deep recession."

"I think the biggest factor right now is the Fed," he added. "And if anything, this Russian event may make the Fed a bit less hawkish."

And indeed, market participants have now priced in a much lower probability that Federal Reserve officials will front-load their interest rate hiking cycle and raise rates by 50 basis points at the end of their March meeting. The last time the Fed raised rates by more than 25 basis points in one meeting was in 2000. While such a move would serve as an aggressive shift by the Fed to begin actively reining in inflation, it could also further roil financial markets that have already endured increased volatility this year and that have now also been spooked by the specter of further international conflict.

"This has been the second worst start to the year for U.S. equities since 2000. Yet, these moves are not solely (or even mostly) driven by the Russia/Ukraine tensions," Seema Shah, Sharing Principal Global Investors chief strategist, wrote in an email. "Equity declines began in January and were, at least initially, driven by inflation concerns and expectations for significantly sharper central bank tightening."

"Energy prices had been rising steadily throughout the pandemic recovery and in response to lower-than-expected OPEC+ production. Concerns around Federal Reserve balance sheet reduction caused credit spreads to start to gap out in early January," she added. "The Russia/Ukraine situation is certainly significant—but it has simply compounded these already challenging market conditions."

Other strategists also suggested that U.S. stocks would trade primarily based on the monetary policy and earnings implications of any impacts of the latest geopolitical tensions.

"The U.S. economy has pretty low exposure directly to Ukraine and the situation with Russia. However, the important thing here is, how does it impact inflation expectations? And that's really what we're keeping an eye on," Anna S. Han, Wells Fargo Securities equity strategist, told Yahoo Finance Live on Thursday. "As inflation becomes a variable for corporates, the potential for it to eat away at earnings, or a potential for it to really steer the Fed to accelerate or decelerate that rate hike cycle — that's what we're looking at."

 

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