Stocks Close Higher Even as Geopolitical Concerns Remain…..

U.S. stocks closed higher, further building on yesterday’s sharp afternoon upside reversal and ended the week on a high note. However, despite the strong upwards move, uneasiness persisted as the markets remained wary of the knock-on effects of Russia’s incursion into Ukraine. Equities stayed in the green throughout the day as some early reports indicated that President Putin may be willing to hold high level talks with Ukraine. The geopolitical turmoil once again overshadowed another round of earnings reports and an abundance of economic data as personal income and spending topped forecasts, along with durable goods orders and consumer sentiment, though pending home sales unexpectedly fell. On the corporate front, Foot Locker and Dell Technologies saw pressure after offering disappointing guidance. Treasuries were mixed as the yield curve flattened after yesterday’s wild ride, and the U.S. dollar trimmed some of yesterday’s rally. Crude oil prices relinquished some of a recent rally and gold gave back its strong advance as of late. Asia finished mostly higher after the action in the U.S. yesterday, while Europe broadly rebounded, partially aided by the reports out of Russia regarding potential talks.

The Dow Jones Industrial Average advanced 835 points (2.5%) to 34,059, the S&P 500 Index added 96 points (2.2%) to 4,385, and the Nasdaq Composite increased 221 points (1.6%) to 13,695. In heavy volume, 5.1 billion shares of NYSE-listed stocks were traded, and 4.6 billion shares changed hands on the Nasdaq. WTI crude oil fell $1.22 to $91.59 per barrel. Elsewhere, the gold spot price traded $38.70 lower to $1,887.60 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was down 0.6% at 96.56. Markets were mostly higher for the week, as the DJIA was down 0.1%, the S&P 500 gained 0.8%, and the Nasdaq Composite rose 1.1%.

Personal income came in flat month-over-month (m/m) in January, better than the Bloomberg consensus forecast of a 0.3% decline, and December’s figure was upwardly-revised to a 0.4% gain. Personal spending rose 2.1%, north of expectations of a 1.6% rise, and compared to the prior month’s downwardly-adjusted 0.8% decrease. The January savings rate as a percentage of disposable income was 6.4%, down from December’s upwardly-revised 8.2% rate.

The PCE Deflator increased 0.6% m/m, in line with expectations, and following December’s upwardly-adjusted 0.5% rise. Compared to last year, the deflator was 6.1% higher, above estimates of a 6.0% increase, and north of the prior month’s unadjusted 5.8% gain. Excluding food and energy, the PCE Core Price Index rose 0.5% m/m, matching expectations, and December’s unrevised rise. The index was 5.2% higher y/y, in line with estimates, and above December’s un-revised 4.9% rise.

January preliminary durable goods orders rose 1.6% m/m, compared to estimates of a 1.0% increase and versus December’s sharp upward revision to a 1.2% gain from the previously-reported 0.7% decline. Ex-transportation, orders were up 0.7% m/m, north of forecasts calling for a 0.4% advance and compared to December’s favorably-adjusted 0.9% rise. Orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, were higher by 0.9%, compared to projections of a 0.3% rise, and versus the prior month’s upwardly-revised 0.4% gain.

The February final University of Michigan Consumer Sentiment Index was unexpectedly revised higher to 62.8, from the preliminary 61.7 figure, where it was expected to remain. The upward revision came as the expectations component of the survey was adjusted higher to more than offset a downward revision to the current conditions portion. The overall index was well below January’s 67.2 level as both current conditions and expectations deteriorated m/m. The 1-year inflation forecast remained at the prior month’s 4.9% rate, while the 5-10 year inflation forecast dipped to 3.0% from the 3.1% level in January.

Pending home sales unexpectedly fell by 5.7% m/m in January, versus estimates of a 0.2% rise, and following December’s favorably-revised 2.3% drop. Sales tumbled 9.1% y/y, versus forecasts of a 1.8% decrease, on the heels of December’s positively-adjusted 5.8% decline. Pending home sales reflect contract signings and are a gauge of the pipeline of existing home sales.

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