MW Dow climbs over 600 points as Powell points to March rate liftoff, vows to stay nimble as Ukraine conflict unfolds
By Joy Wiltermuth and Mark DeCambre
'Weather is in our favor over the next few weeks,' investor says about spike in oil as Russia steps up Ukraine attack
U.S. stock indexes climbed Wednesday afternoon, with gains gathering steam after Federal Reserve Chairman Jerome Powell outlined plans to begin dialing back the central bank's easy-money stance to fight inflation, while playing down the prospect of a larger-than-usual increase of benchmark rates in March, in testimony on Capitol Hill.
Wall Street also monitored headlines indicating Ukraine and Russia could be headed for new negotiations, even as the conflict continues.
What are stock benchmarks doing?
On Tuesday, the Dow fell nearly 600 points, or 1.8%, while the S&P 500 and Nasdaq Composite each slid 1.6%.
What's driving the market?
Stocks touched session highs after Fed Chairman Powell said it would be appropriate for the central bank to raise its benchmark interest rate, currently in a range between 0% and 0.25%, at its meeting in two weeks. Powel indicated support for a 25 basis point increase rather than a larger 50 basis point increase when the Fed convenes its two-day meeting on March 16.
Fed-fund futures were pricing in a near-zero chance that the Fed would raise interest rates by a half-point in March, a dramatic shift from recent weeks. The 10-year Treasury rate shot higher to 1.86%, with the S&P 500's energy and financials sectors leading the advance for stocks.
Powell's testimony "did clarify his and the Fed's approach to withdrawing stimulus in 2022 amid increased uncertainty from the Russia-Ukraine conflict," said Bill Adams, chief economist at Comerica Bank, in written comments, adding that Powell sees the maximum employment part of his mandate as largely fulfilled.
"With inflation at a multidecade high, the Fed is anxious to get off of a crisis footing," Adams said, while also looking to "cool demand enough to get inflation under control, but not choke off the recovery."
However, St. Louis Fed President James Bullard said the central bank needs to adopt a more aggressive monetary policy stance to combat surging pricing pressures. Bullard, a voting member of the rate-setting Federal Open Market Committee this year, has consistently called for an aggressive approach to monetary tightening.
Comments from monetary policy makers come as investors also watched headlines from the seventh day of conflict in Ukraine that has seen Russian forces step up shelling of civilian areas.
Russia continued to pound Ukraine's second-largest city, Kharkiv, on Wednesday, with both sides indicating they were ready to resume talks to end the fighting. The U.N. General Assembly voted on Wednesday to condemn Russia's Ukraine invasion, while calling for an immediate end to the war.
Surging energy prices also were in focus for Wednesday, with April West Texas Intermediate crude
The U.S. and other countries in the International Energy Agency agreed on Tuesday to release 60 million barrels of oil from their emergency reserves, to help with any supply shortfall caused by Russia's invasion of Ukraine. Also, OPEC+, made up of the Organization of the Petroleum Exporting Countries and its allies, including Russia, offered no surprises at its monthly meeting, quickly agreeing to boost production in April by another 400,000 barrels a day.
"Weather is in our favor over the next few weeks," said John Carey, director of equity income at Amundi US, in a phone interview, of higher energy costs. "It's still cold, but at a certain point over the next few weeks, the weather will warm up, so it may not be such an acute problem than it would have been a month ago."
Even so, Carey said it remains difficult to know how to position a portfolio, given uncertainties around how far Putin intends to take his attack on Ukraine. "I think there will be continued volatility like the swings we are seeing in the market, one day to the next."
President Joe Biden delivered an optimistic State of the Union speech on Tuesday evening, saying that America is "stronger today than we were a year ago," even as war rages on in Eastern Europe and concerns about inflation linger domestically.
Biden offered a plan to drive down inflation by boosting domestic manufacturing and highlighted treatments and vaccines against the coronavirus.
The U.S. also announced Tuesday it was closing off American airspace to all Russian flights, a point that Biden mentioned in his speech as, "further isolating Russia and adding an additional squeeze on their economy."
See: Zelensky says Putin is now resorting to the tactics of a terrorist in Ukraine offensive
In economic reports, the Fed's Beige Book survey of economic activity showed modest expansion in the final weeks of last year due to supply-chain disruptions and labor shortages, but also a pullback in leisure travel due to the omicron variant.
The private sector added 475,000 new jobs in February, payroll processor ADP said -- after omicron faded, governments eased pandemic restrictions and the economy perked up. Economists surveyed by The Wall Street Journal had forecast a 400,000 increase.
Which companies are in focus?
How are other assets faring
---Barbara Kollmeyer contributed to this article
-Joy Wiltermuth
$(END)$ Dow Jones Newswires
March 02, 2022 14:47 ET (19:47 GMT)
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