Stock Market News for Feb 16, 2022
U.S. stocks markets closed sharply higher on Tuesday following de-escalation of geopolitical crisis between Russia and Ukraine. Wall Street has seen a broad-based rally after three consecutive days of losing sidelining investors’ concern of higher interest rate in March. All three major stock indexes ended in positive territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) surged 1.2% or 422.67 points to close at 34,988.84. Notably, 26 components of the 30-stock index ended in green while 4 in red. The tech-heavy Nasdaq Composite finished at 14,139.76, climbing 2.5% or 348.84 points due to the strong performance of large-cap technology stocks.
Meanwhile, the S&P 500 rallied 1.6% to end at 4,471.07. Nine out of eleven sectors of the benchmark index closed in positive territory while two in red. The Technology Select Sector SPDR (XLK), the Consumer Discretionary Select Sector SPDR (XLY) and the Materials Select Sector SPDR (XLB) advanced 2.6%, 2.2% and 1.8%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was down 9.3% to 25.70. A total of 10.63 billion shares were traded on Tuesday, lower than the last 20-session average of 12.60 billion. Advancers outnumbered decliners on the NYSE by a 3.03-to-1 ratio. On Nasdaq, a 3.87-to-1 ratio favored advancing issues.
De-escalation of Geopolitical Tensions
The geopolitical conflicts between Russia and Ukraine have eased to some extent. Russian Defense Ministry spokesman Igor Konashenkov said troops that were deployed in the southern and western military districts neighboring to the Ukraine border had completed their military exercise and “have already begun loading onto rail and road transport and will begin moving to their military garrisons today.”
Stock markets across the world rallied following the news. In the U.S. reopening sectors like airlines and leisure-travel operators gained. However, the energy sector suffered as the crude oil price fell immediately.
Fed to Take Tough Monetary Stance
On Jan 26, after the conclusion of the first Fed FOMC meeting of this year, Fed Chairman Jerome Powell made it clear the first rate hike in three years as early as in March. The central bank’s quantitative easing program will also end in March. In a separate press statement, the FOMC has also indicated that the Fed is thinking of shrinking its $9 trillion balance sheet later this year.
Meanwhile, the consumer price index for January surged 7.5% year over year, triggering a large section of economists and financial researchers to predict a 50 basis point hike in the benchmark lending rate in March instead of the market’s expectation of 25 basis point hike.
Some investment bankers have also said that the central bank may raise interest rate seven time this year with a magnitude of 25 basis point each time. Consequently, the yield on the benchmark 10-Year U.S. Treasury Note climbed more than 2%. The yield was 1.5% at the beginning of 2022.
M&A Deal
Intel Corp. INTC has entered into a $5.4 billion deal to acquire chipset manufacturer Tower Semiconductor Ltd. TSEM. Tower Semiconductor makes a wide variety of chips for mass consumer, industrial, automotive and mobile markets. The company has production facilities in the United States, Israel and Italy.
Consequently, shares of Tower Semiconductor soared 42.1% and Intel rose 1.8%. Intel carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Economic Data
The Department of Labor reported that the producer price index (PPI) rose 1% in January compared with the consensus estimate of 0.5%. December’s data was revised upward from 0.2% to 0.4%. Year over year, PPI increased 9.7%.
The core producer price index (excluding volatile energy and food items) rose 0.8% in January compared with the consensus estimate of 0.4%. December’s data was revised downward from 0.5% to 0.4%. Year over year, core PPI increased 6.9%.
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