Stocks were lower Wednesday, after Russia played down peace talks with Ukraine, and its attacks intensified.
Russia is shifting its military focus to the east of Ukraine, moving attacks to areas away from Kyiv. Ukraine’s governor of the Chernihiv region, Viacheslav Chaus, said he isn’t convinced that Russia truly intends to be peaceful.
The price of WTI crude oil, meanwhile, rose more than 2% to $106 a barrel. This all comes just a day after stocks rallied and oil fell partially on news that peace talks between the two sides were going well. Overall, the stock market has had quite a run, with the S&P 500 up 11% from its low point of the year in early March to Tuesday’s closing level.
“Yesterday’s Ukraine headlines boosted sentiment and oil prices declined,” wrote Dennis DeBusschere, founder of 22VResearch. “Today, headlines suggest Russia-Ukraine negotiations are in early stages, and oil prices are rebounding.”
The slight reversal trade seen Wednesday—stocks down and oil up—is nothing new for markets this year. Days with good news on the Russia situation have been followed by days with smaller stock gains and a slight rise in the price of oil, according to Dow Jones market data.
Overall, markets are concerned about the state of the economy. The yield curve briefly inverted Tuesday, which means the 2-year Treasury yield was higher than the 10-year Treasury yield. That’s often a sign that a recession is on the way.
Wednesday, the 10-year yield moved back above the 2-year yield, but only by 0.03 percentage points. The signal is that the Federal Reserve’s planned interest rate hikes—in response to high inflation—could dramatically slow down the economy for the longer-term.
“The 10/2 spread temporarily inverted yesterday,” wrote Chris Senyek, chief investment strategist at Wolfe Research. “Typically, a 10/2 inversion is a strong indicator that clock has started ticking on the emergence of the next recession.”
Concern about the economy has recently driven investors into technology stocks, even though the tech-heavy Nasdaq 100 was down a tick Wednesday. The Nasdaq 100, heavily comprised of fast-growing technology stocks that largely don’t need strong economic demand to drive sales and profit growth, has risen almost 17% from its closing low this year, hit in mid-March. Now, about 99% of stocks on the index are trading above their 20-day moving averages, according to Instinet data.
That’s a sign that those stocks are getting back on track—and could perform well from here. In the three instances when 99% of names on the index traded at such a level, the average gain for the index for the following three months was about 19%, according to Dow Jones market data.
Still, the stock market, while declining Wednesday, isn’t exactly in panic mode. The main reason is because it often takes a few years for a recession to set in after the yield curve inverts.
“Yield curve inversions have historically predicted recessions with a long and uncertain lag,” wrote Mark Haefele, chief investment officer of global wealth management at UBS.
In fact, it takes a year and a quarter, on average, for the economy to enter recession after the yield curve inverts, according to Truist data.
Consistent with that, analysts are currently expecting aggregate earnings per share for S&P 500 companies to grow each year for the next few years, according to FactSet data.
Elsewhere, the ADP jobs report showed that the U.S. added 455,000 private sector jobs in March. The key jobs data comes out Friday, when the Bureau of Labor Statistics publishes its employment report for March, which economists expect to show a gain of 490,000 jobs. Markets want to see that the U.S. economy is adding jobs at a brisk pace, though too brisk a pace could compel the Fed to lift interest rates by a half a percentage point in its next meeting, rather than the standard quarter of a percentage point.
Overseas, the pan-European
fell 0.4%, and Tokyo’s
Here are four stocks on the move Wednesday:
(ticker: MU) was down 1.1% after the chip maker reported better-than-expected results late Tuesday and provided an upbeat outlook that was more optimistic than Wall Street’s estimates.
(RH) stock was down12% after the…