Wall Street looks set to add on to its March rally Tuesday, as peace talks between Russia and Ukraine resume in Istanbul, but worry bond market moves may cap gains later in the session.
Updated at 9:45 am EST
U.S. stocks powered higher Tuesday, while oil prices tumbled and Treasury yields retreated sharply, as global markets focused on the first face-to-face peace talks between Russia and Ukraine in more than three weeks.
Turkish President Tayyip Erdogan welcomed officials from both sides of the month-long conflict to Istanbul Tuesday, and while few expect a breakthrough agreement as Russian shells continue to rain down on cities in eastern Ukraine, the sit-down does mark an important step in brokering a near-term ceasefire.
That said, stocks extended pre-market gains, as well, after Russia’s Deputy Defense minister, Aleksey Krivoruchko, said the military would “fundamentally cut back activity in the direction of Kyiv and Chernihiv” as Moscow looks to “increase mutual trust for future negotiations to agree and sign a peace deal with Ukraine.”
At the time time, Deputy U.S. Treasury Secretary Wally Adeyemo will lead a delegation of U.S. officials for another meeting with European officials Tuesday to discuss deeper sanctions on Moscow, including those focused on its export supply chain, although none are likely to directly impact its main energy exports.
Russia, meanwhile is demanding that payments made for its natural gas exports to European markets be made in rubles, and has threated to shut-off supplies to countries unwilling to do so over the coming weeks.
That has helped keep oil prices elevated, but demand concerns linked to the ongoing lockdown in Shanghai and China’s broader struggle to control its Covid outbreak, as well as Russia’s comments on scaling back military activity, sent WTI crude futures for May delivery $6.41 in early New York trading to change hands at $99.55 per barrel.
Investors were also closely tracking moves in the bond market, where 10-year Treasury note yields breached the 2.5% mark and key segment of the yield curve is again nearing inversion.
Benchmark 2-year note yields climbed to as high as 2.435% in overnight trading, before paring that advance to 2.355% in the wake of reports from Istanbul, pegging the difference between 2-year and 10-year paper at just 6.1 basis points.
A move higher in 2-year yields, usually linked to bets on higher Fed rates, could trigger the first ‘inversion’ of the U.S. yield curve since 2019. If the inversion holds, it’s a move that has signaled each of the last eight recessions.
The CME Group’s FedWatch tool, meanwhile, continues to price in faster Fed rate hikes, and now suggests a 72.2% chance of a 50 basis point move higher at next month’s meeting, with odds of a 50 basis point follow-on hike in June now sitting at 60.1%.
On Wall Street, the Dow Jones Industrial Average gained 335 points at the start of trading while the S&P 500, which is down 3.25% for the year, but up 5.4% for the month, booked an early 37 points advance. The tech-focused Nasdaq gained 155 points.
In terms of individual stocks, FedEx (FDX) – Get FedEx Corporation Report shares jumped 4.3% after the world’s biggest package delivery group said its chief operating officer, Raj Subramaniam, would replace longtime boss and company founder Fred Smith as CEO later this year.
Micron Technology (MU) – Get Micron Technology, Inc. Report edged 1.3% higher ahead of the chipmaker’s second quarter earnings after the closing bell, with investors looking to data center demand to offset weakness in handset and PC markets.
And Nielsen Holdings (NLSN) – Get Nielsen Holdings Plc Report shares soared 21.6% after a consortium of buyers lead by activist investors Elliott Investment Management agreed to acquire the TV ratings group for $16 billion.
In overseas markets, Europe’s Stoxx 600 was marked 1.39% higher by mid-afternoon trading in Frankfurt, reaching the highest levels in five weeks, while Asia’s MSCI ex-Japan benchmark ended the session 0.8% higher thanks to solid gains for markets in Hong Kong and South Korea.
