U.S. Equities Rise As Market Volatility Remains…..

U.S. equities closed solidly higher on the day, even as market volatility remained elevated given the ongoing conflict between Russia and Ukraine. As geopolitical tensions continued to simmer, the markets appeared to focus on the positives, as talks between Russia and Ukraine continued and early reports suggested a relatively more upbeat tone. Meanwhile economic data was also in focus after the producer price report came in softer-than-expected, wholesale prices remained elevated and New York regional manufacturing activity took a surprising fall. The Fed officially kicked off its two-day monetary policy meeting today and is expected to begin its rate hike campaign, although uncertainty remains regarding the speed and magnitude with which the hikes will take place. In corporate news, Vail Resorts posted mixed results but rose after announcing a wage increase as well as increasing its quarterly dividend, and airlines also moved higher following news of strong travel demand coming out of the omicron wave. Treasuries were lower as yields turned positive later in the session. The U.S. dollar was little changed, gold lost ground, and oil plunged for the second day in a row. European stocks closed mixed amid the ongoing war in Ukraine, and Asia finished mostly lower after Chinese tech stocks took a big hit, and COVID cases in China are rapidly rising.

The Dow Jones Industrial Average rose 599 points (1.8%) to 33,544, while the S&P 500 Index gained 89 points (2.1%) to 4,262, and the Nasdaq Composite increased 367 points (2.9%) to 12,949. In heavy volume, 5.3 billion shares of NYSE-listed stocks were traded, and 5.3 billion shares changed hands on the Nasdaq. WTI crude oil plunged $6.57 to $96.44 per barrel. Elsewhere, the gold spot price traded $31.10 lower to $1,929.70 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was little changed at 99.01.

The Producer Price Index (PPI) showed prices at the wholesale level in February rose 0.8% month-over-month (m/m), below the Bloomberg consensus estimate of a 0.9% gain, and south of January’s unrevised 1.0% increase. The core rate, which excludes food and energy, gained 0.2% m/m, below estimates of a 0.6% rise and below the prior month’s unadjusted 0.8% rise. Y/Y, the headline rate was 10.0% higher, just above the prior month’s 9.7% rise, and right in line with expectations. The core PPI increased 8.4% y/y last month, below estimates of 8.7% and slightly above January’s 8.3%.

The Empire Manufacturing Index, a measure of activity in the New York region, showed the index moved back to a reading depicting contraction (a reading below zero) after rising above the demarcation point last month. The index decreased to -11.8 in March from 3.1 that was posted in February and compared to the Bloomberg estimate of an increase to 6.4. The decline came as new orders and employment both decreased, with the former moving back below zero, while the expansion in inventories accelerated, and prices paid dipped slightly but continued to be elevated.

Treasuries were lower as the yields on the 2-year note and 10-year note gained 1 basis point (bp) to 1.86% and 2.15%, respectively, and the 30-year bond rate rose 2 bps to 2.49%.

The Federal Open Market Committee (FOMC) kicked-off its two-day monetary policy meeting today, with a decision set for tomorrow. The FOMC is expected to announce the beginning of a rate-hiking cycle with a 25 basis point increase to its target for the fed funds rate at this meeting. Given the general uncertainty permeating throughout the markets and history of sensitivity to Fed decisions, investors will be watching the committee’s statement closely. The meeting will also be accompanied by updated economic projections and the customary press conference by Chairman Jerome Powell which are also likely to be closely scrutinized as the Fed moves towards tightening monetary policy.

Beyond the conclusion of the FOMC’s policy meeting, tomorrow’s economic calendar in the U.S. will offer a full slate of activity, beginning with a pair of before the bell releases including advance retail sales, forecasted to have risen 0.4% month-over-month (m/m) during February, while sales ex-autos and ex-autos and gas are expected to post an increase of 0.9% for the former and an increase of 0.4% for the latter, as well as the February Import Price Index, forecasted to show a 1.6% m/m increase. The day will also offer business inventories, projected to have risen 1.1% m/m during January, and the NAHB Housing Market Index, estimated to show a reading of 81.0 for March, below February’s 82.0 reading, with 50 the demarcation point between good and poor conditions. Finally, MBA Mortgage Applications will round out the docket.

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