Thursday March 3rd


Stock futures rise slightly as Russia-Ukraine tensions weigh

U.S. stock market index futures were slightly higher in early trading Thursday, after the major averages finished the day higher despite escalating tensions between Russia and Ukraine. Futures contracts tied to the Dow Jones Industrial Average ticked up 88 points. S&P 500 futures moved up about 0.3%, while Nasdaq 100 futures inched up 0.1%. The moves come after a volatile start to the week, with markets seeing sharp reversals in some areas day to day. Stocks, and the tech sector in particular, have been in a downtrend in recent months. Some on Wall Street are arguing that the market is close to or has already found its bottom for the year. On Thursday, strategists at Citi upgraded their view on U.S. stocks and the global IT sector. “Despite the difficult events in Ukraine, global equities have been fairly robust. Losses have been concentrated in stocks with direct Russia exposure and Financials. We still want to buy the dips, and highlight that global equities have ended 10-20% higher after previous geopolitical crises,” Citi strategist Robert Buckland said in a note to clients. Others, however, warn that it could be a bumpy year ahead as the market navigates expected rate hikes and policy tightening from the Federal Reserve. “Markets have been resilient. How long will that last? It’s getting weaker and it’s getting weaker because the Fed is not injecting liquidity starting from this month,” Allianz chief economic advisor Mohamed El-Erian sadi on “Squawk Box.” “So I expect the strong technicals that have seen us through one shock after the other will get a lot weaker this year, and that means more volatile markets and that also means there’s going to be more pressure on markets.” On the earnings front Thursday, shares of Best Buy rose 8% after the retailer met earnings expectations and hiked its dividend, and Kroger climbed 5% after beating estimates on the top and bottom lines. Software stock Snowflake dropped 20% after the company reported slowing revenue growth. BJ’s Wholesale, Burlington Stores and Big Lots were all down in premarket trading after their earnings reports. Energy prices continued to move higher, with U.S. oil benchmark West Texas Intermediate crude up 2.34% to $113.13 and global benchmark Brent crude gaining 1.6% to $114.84. The yield on the benchmark U.S. 10-year Treasury nudged lower Thursday to about 1.85%, after having its biggest one-day jump since 2020 during the previous session. Markets continued to watch the situation in Ukraine, where fighting entered its second week. Ukrainians maintained the capital city of Kyiv, while heavy shelling hit Maripol and Kharkiv. “The situation is very fluid on the ground in Ukraine. ...We don’t know where the ultimate bottom in the market may be, but we continue to believe the U.S. economy will have above-average growth this year,” said Scott Wren, senior global market strategist at Wells Fargo Investment Institute. Markets have been volatile in recent sessions as investors assess risks to the U.S. economy fueled by Russia’s war in Ukraine. Federal Reserve Chairman Jerome Powell will speak to the Senate Banking Committee for his second day of Congressional testimony this week. On Wednesday, the central bank chief seemed to tamp down talk of a half-point interest rate hike at its meeting in two weeks, though he left the door open for more aggressive action. “We’re going to avoid adding uncertainty to what is already an extraordinarily challenging and uncertain moment,” Powell said Wednesday under questioning from House Financial Services Committee members. “To the extent that inflation comes in higher or is more persistently high than that, we would be prepared to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings,” he added. In the wake of Powell’s testimony, traders took the possibility of a 50 basis point hike at this month’s meeting completely off the table, though they are still pricing the equivalent of six 25 basis point moves by the end of the year, according to the CME Group’s FedWatch tracker. On the economic front, jobless claims for last week came in at 215,000. That was lower than the 225,000 expected by economists, according to Dow Jones. During regular trading on Wednesday the Dow advanced nearly 600 points, or 1.79%, snapping a two-day losing streak. The S&P 500 gained 1.86%, while the Nasdaq Composite added 1.62%. It was the tech-heavy index’s fourth positive session in the last five. Wednesday’s rally was broad-based, with all eleven S&P 500 sectors advancing. Visa was the sole Dow component to decline, with the other 29 stocks in the benchmark index finishing the day in the green. Caterpillar was the top gainer, rising more than 5%. A strong private payrolls report on Wednesday also boosted sentiment on Wall Street. On Thursday weekly jobless claims will be posted, with economists calling for a print of 225,000, according to estimates from Dow Jones. The reading comes ahead of February’s highly-anticipated jobs report, which will be released Friday. Economists are expecting 440,000 jobs to have been added during the month. January’s report showed an increase of 467,000. Shares in Asia-Pacific were mixed on Thursday as U.S. stocks bounced back overnight. Oil prices, meanwhile, continued to move higher following a price surge in recent days. The Nikkei 225 in Japan closed 0.7% higher at 26,577.27 while the Topix index climbed 1.18% to 1,881.80. South Korea’s Kospi also gained 1.61%, ending its trading day at 2,747.08. Mainland Chinese stocks closed in negative territory, with the Shanghai composite falling fractionally to 3,481.11 while the Shenzhen component slipped 1.087% to 13,201.82. Hong Kong’s Hang Seng index edged 0.51% higher, as of its final hour of trading. Oil prices extended their rally on Thursday, with Brent rising above $116 a barrel, as trade disruption and shipping issues from Russian sanctions over the Ukraine crisis sparked supply worries while U.S. crude stocks fell to multi-year lows. The Organization of the Petroleum Exporting Countries and their allies including Russia have decided to maintain an increase in output by 400,000 barrels per day in March despite the price surge, ignoring the Ukraine crisis during their talks and snubbing calls from consumers for more crude. Brent crude futures rallied to $116.83 a barrel, the highest since August 2013. The contract was at $116.60 a barrel, up $3.67 by 0112 GMT. U.S. West Texas Intermediate crude was at $113.01 a barrel, up $2.41 after touching a fresh 11-year high of $113.31 a barrel. Palladium raced to an over seven-month peak on Thursday in a rally sparked by concerns over supply from top producer Russia, while a relatively less hawkish Federal Reserve and safe-haven demand due to the Ukraine crisis boosted gold prices. Spot palladium, used by automakers in catalytic converters to curb emissions, jumped 4.1% to $2,778.48 by 1030 GMT, rising for a fourth session to hit its highest since mid-June 2021. “The market is in ‘self sanction mode’ trying to avoid anything relating to Russian oil, Russian palladium, Russian whatever,” said Bernard Dahdah, an analyst at Natixis. Spot gold rose 0.4% to $1,933.14 per ounce. U.S. gold futures gained 0.6% to $1,933.20.