Stock Soar as Market Feeling Better About Russia-Ukraine Situation
5:02 pm Friday, February 25th, 2022
The stock market was in rebound-rally mode on rising hopes that the Russia-Ukraine situation won’t have a material impact on the economy, particularly when it comes to inflationary pressures.
The catalyst for this thinking appears to be news that Russia is ready to send delegation to Minsk to hold diplomatic talks with Ukraine. That news followed reports indicating that Ukraine’s capital was under attack, signaling that Russia’s “special military operation” is almost over without receiving sanctions on its oil and gas exports.
The fluidity of the situation, though, has the health care (+3.0%), consumer staples (+2.9%), and utilities (+2.7%) sectors also up more than 2.5% as investors respect possibility for a negative headline. Every sector is up more than 1.0%.
Be that as it may, there is a risk-on edge to today’s market, fueled in part by reports suggesting Russia is open to sending a delegation to Minsk to discuss diplomatic solutions. Those reports have run alongside reports that Russian troops are on the verge of taking Kyiv with the aim of toppling the government there.
Commodities might be down, but inflation is still here, which is an issue that brings the Fed back in the picture. Prior to the open, investors received PCE inflation data for January that continued to run hot.
Briefly, the PCE Price Index was up 0.6% (consensus 0.5%), leaving it up 6.1% year-over-year. The core PCE Price Index, which excludes food and energy, was up 0.5%, as expected, leaving it up 5.2% year-over-year.
The report has supported the seven-basis-point increase in the 2-yr yield (1.61%), yet the CME FedWatch Tool has decreased the probability for a 50-bps hike in March to 21.1% from 33.7% yesterday. The 10-yr yield is up three basis points to 2.00%.
