Market Up Modestly On Deal Between The U.S. And EU

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U.S. equity futures are modestly higher this morning following yesterday’s large move up and a second strong week in a row for the stock market. Much of the focus will be abroad, however, with President Biden traveling to a town near the Polish-Ukrainian border today and news of a gas deal with the EU to help end its dependence on Russian energy.  

Potential Market Movers

S&P 500 futures (/ES) are up .30% before the market open, and Dow Jones Industrial Average futures (/YM) and Nasdaq 100 futures (/NQ) are also up .25% and .40%, respectively. This follows a mostly lower session out of Asia overnight and a generally positive day in European markets. The S&P 500 is now up over 9% from its low on March 15, and the Nasdaq 100 is up nearly 15%. This strong move has pushed the CBOE Market Volatility Index (VIX) down below 22, a level still above its historical average but well below the levels we’ve seen lately. This lessening of the VIX shows that market jitters have relaxed somewhat.

Of course, much of the concern that has manifested in the U.S. market comes from abroad. Inflation in general, and energy prices specifically have been in the forefront of investors’ minds. Crude Oil futures (/CL) are down 2.6% this morning while Natural Gas futures (/NQ) are up 1.5%. The latter commodity is in the news as the U.S. and the EU announced they will partner to supply at least 15 billion cubic meters of liquified natural gas this year to Europe. The goal, of course, is to lessen European reliance on Russian energy. This announcement may have helped to settle oil prices after recent moves and news that Russia will only accept Rubles for oil payment from “unfriendly countries.”

The yield on the 10-Year Treasury Note (TNX) is up to 2.6% this morning but seems to have taken a pause the past few days after the sharp move it took since early March, when it was near 1.7%. Inflation data, consumer activity, and Fed policy all are big factors in determining the level of interest rates, and right now, there appears to be as much concern in the flattening yield curve as there is in the interest rate itself. Interestingly, while much of the focus of market watchers has been on the 10-year / 2-year yield curve, Fed Chairman Powell indicated yesterday that the 10-year / 3-month curve is the more telling indicator to watch.

A couple additional factors that could move the market today are four Fed speakers who could help give investors insights into the future course of monetary policy as well as the University of Michigan Consumer Sentiment report. This report will be released at 10 am Eastern time. The estimate for the reading is 59.7 and has been falling for several months. If the number comes in low, look for the market to react negatively.

Reviewing the Market Minutes

U.S. stocks snatched back Wednesday’s losses during a topsy-turvy week, driven by the threat of escalating interest rates and the ongoing conflict in Ukraine.

All 11 sectors of the S&P 500 (SPX) were in the green, giving the index a 1.4% bump at the close. The Dow Jones Industrial Average ($DJI) advanced by 1%, while the tech-heavy Nasdaq Composite ($COMP) led all three with a 2% gain on the session.

Uber UBER jumped 5% after the shared-riding service said it would list all New York City taxis on its app in a move aimed at easing its driver shortage by making friends with a service it once had hoped to upend.

“It’s bigger and bolder than anything we’ve done,” Andrew Macdonald, the firm’s global mobility chief, said in published reports. Terms of the deal were not announced.

Demand for chips helped boost shares of Nvidia NVDA nearly 10% as well as Intel INTC shares, which ended the session up nearly 7%. 

Apple AAPL is toying with a new approach to device ownership: a subscription service, Bloomberg reported. Still under development, the service would expand the technology giant’s subscriptions services beyond those such as Apple Music and Apple TV+ to hardware, including iPhones, Macs, and iPads.

The program, so far, calls for a monthly fee that Bloomberg said was akin to an auto-leasing program: Take home the iPhone, and pay it off in installment fees. There was no mention of interest rates on those plans.

The news caught investor interest, helping push shares higher by 2.27% at the close. APPL shares have bounced around since the start of the year and are still down nearly 8%.

CHART OF THE DAY: SOX RELIEF. The Philadelphia Semiconductor Index, the go-to for technology chip manufacturing performance, pulled ahead to close at 3,532.72, up 5.13%. That was the first close above the 200-day moving average since mid-February, signaling a potential return to semiconductor growth. Data Sources: ICE, S&P Dow Jones Indices. Chart source: The thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Three Things to Watch

TOUGHEN UP JOE: That’s the message from a poll about President Joe Biden’s actions conducted by the Associated Press and NORC at the University of Chicago. While there is widespread public support for the sanctions the president has put in place against Russia, 56% don’t think he’s bullied the country enough.

Only 6% told pollsters they believed he was too tough, and 36% said the U.S. response was about right. Overall, 68% of respondents gave the green light to the economic sanctions overall, and 70% said they favored banning oil imported from Russia.

Overall, Biden’s job effectiveness continues to lag: 56% of those surveyed were disappointed with how he’s handling his job as president, while 43% were OK with it.

AMERICANS GO BACK TO WORK: Many traders today probably don’t remember the job situation in 1969, but it was much like it is today, according to the Labor Department.

Unemployment benefits—at lofty levels not so long ago—are shrinking quickly, tumbling to a seasonally adjusted 187,000 for the week that ended March 19, the Labor Department reported. A year ago, claims were climbing with an unexpected jump to 770,000.

The record high, fueled by COVID-19 and the massive lockdown throughout the country, stands at 6.149 million in early April 2020.

The cloud hanging above slowing jobless claims is none other than rising interest rates. As the economy tightens, it could prompt the Federal Reserve to ramp up rates at a relatively rapid pace.

“U.S. business are not laying off workers because they know the enormous challenges they’re facing in filling open positions,” Ryan Sweet, a senior economist at Moody’s Analytics, told Reuters.

“If initial claims remain below 200,000 for a period of time, it will raise a red flag with the Fed,” he added.

END TO GROWTH? Orders made for manufacturers, commonly known as durable goods, dropped by 2.2% in February, ending four-straight months of growth. Total value fell to $271.5 billion from $277.6 billion, the Census Bureau reported.

Orders for non-defense aircraft and parts were the biggest culprit, plunging 30.4%. Orders for new transportation equipment slumped 5.4%.

The dips for durable goods by U.S. firms could create headwinds in the months ahead as fears about supply chains grow amid Russia’s invasion of Ukraine. Shutdowns also underway in China, which is getting hit with COVID-19 outbreaks, are likely to intensify issues.

This all could result in higher inflation that could put the Fed in a more hawkish direction. Stay tuned.

Notable Calendar Items

March 29: JOLTS Job Openings

March 30: ADP Non-Farm Employment Report

March 31: Core PCE Price Index

April 1: Unemployment Rate, ISM Manufacturing

TD Ameritrade® commentary for educational purposes only. Member SIPC.

Image sourced from Pixabay

This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.