The prospect of talks between the U.S. and Russia over the Ukraine crisis has stocks moving higher Friday, but tensions in the region remain high and investors on the defensive.
U.S. equity futures bounced higher Friday, following on from one of the biggest single-day declines of the year for the Dow, as investors looked for a diplomatic resolution to the Russia-Ukraine crisis that has rocked markets for much of the week.
U.S. Secretary of State Anthony Blinken is set to meet Russia’s Foreign Minister Sergei Lavrov next week, the State Department said late Thursday, with President Joe Biden scheduled to speak with NATO leaders later today. Both moves suggest the U.S. has yet to exhaust its diplomatic efforts, while Russia has insisted its withdrawn troops and tanks from the Ukraine border.
The U.S. said the meeting, however, was predicated on Russia holding true to its vow that it isn’t intending to launch a military incursion.
“If they do invade in the coming days, it will make clear they were never serious about diplomacy,” State Department spokesperson Ned Price told reporters in Washington.
The overnight easing of tensions, while potentially only temporary given that Ukrainian government troops and Russia-backed rebels have been trading shellfire for the past two days, lifted stock futures and trimmed the recent march of global oil prices, but safe-haven investment flows continue to hold down Treasury bond yields — which move in the opposite direction of prices — following last night’s market sell-off.
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“Investors, wary of any bad news, have been unable to maintain positive momentum in equity markets across the globe as geopolitical risks dominate headlines,” said Peter Essele, head of portfolio management for Commonwealth Financial Network. “A further escalation of tensions in the near term could roil markets due to the potential impact on a tenuous global supply chain, particularly as the Fed prepares for its first-rate hike in years. A perfect storm may be on the horizon if calmer heads don’t prevail.”
The CME Group’s FedWatch tool suggests investors have tamped down expectations for a 50 basis point rate hike next month to just 28.7%, although St. Louis Fed President James Bullard reiterated his view that a full 1% worth of hikes is needed between now and July 1 during a CNN television interview Thursday.
On Wall Street, futures tied to the Dow Jones Industrial Average are indicating a 140 point opening bell gain while those linked to the S&P 500 are priced for a 23 point advance.
Nasdaq Composite futures are indicating a 100 point gain for the tech-focused benchmark as 10-year Treasury note yields hold at 1.967% in overnight trading.
Roku (ROKU) – Get Roku, Inc. Class A Report shares were the notable pre-market mover, plunging 25% after the streaming service hub posted weaker-than-expected fourth quarter earnings and sharp slowdown in revenue growth.
Deere & Co. (DE) – Get Deere & Company Report bumped 0.4% higher after it posted better-than-expected first quarter earnings and lifted its full-year profit forecast as it sees improving global demand for farm and construction equipment.
Intel (INTC) – Get Intel Corporation Report shares fell 1% after the biggest U.S. chipmaker told investors to expect muted profit margins as it accelerates spending on new foundries and technologies to meet future demand, while extending the timeline on its new strategy roadmap.
And Virgin Galactic (SPCE) – Get Virgin Galactic Holdings Inc Report rose 2% after Chamath Palihapitiya, the outspoken venture capitalist who fronted several special purpose acquisition companies at the peak of last year’s investment frenzy, said he will step down as chairman of Richard Branson’s spaceship group.
Elsewhere, oil prices pull back from their recent 2014 peaks amid bets that talks with Iran could lead to the easing of sanctions linked to its nuclear program and trigger a new line of supplies into the global market.
Brent crude futures for April delivery were marked $1.70 lower on the session at $91.36 per barrel while WTI contracts for March fell $1.85 to $89.91 per barrel.
In overseas markets, Europe’s Stoxx 600 was closely tracking U.S. futures with a mid-day gain of 0.23% while the region-wide MSCI ex-Japan ended the session 0.41% lower following last night’s sell-off on Wall Street.
