Markets Turn Positive in Final Hour of Trading…..

U.S. equities were able to overcome early losses to finish higher on the day, keeping the winning streak alive after a two-week rally. The moves came as the markets have taken some stout headwinds in stride, as investors continue to grapple with the ultimate impact of the war in Ukraine and the uncertainty regarding how aggressive the Fed will be to try to tamp down persisting inflation pressures. In economic news, the trade deficit narrowed, wholesale inventories jumped, and Dallas manufacturing growth slowed. On the equity front, HP agreed to acquire workplace collaboration solutions company POLY in an all-cash transaction implying a total enterprise value of $3.3 billion, while Tesla rose after saying it will seek another stock split. Treasuries were mixed following a recent drop that has boosted yields, and the U.S. dollar gained ground, while crude oil prices and gold tumbled. Europe finished mostly higher amid the ongoing uncertainties, while markets in Asia were mixed.

The Dow Jones Industrial Average rose 95 points (0.3%) to 34,956, the S&P 500 Index gained 32 points (0.7%) to 4,576, and the Nasdaq Composite increased 186 points (1.3%) to 14,355. In moderate volume, 4.2 billion shares of NYSE-listed stocks were traded, and 5.0 billion shares changed hands on the Nasdaq. WTI crude oil plunged $7.94 to $105.96 per barrel. Elsewhere, the gold spot price traded $37.50 lower to $1,916.70 per ounce, and the Dollar Index was up 0.4% at 99.22.

The equity markets posted gains after coming off a two-week winning streak amid some resiliency in the face of the ongoing war between Russia and Ukraine. Optimism for a diplomatic resolution has faded somewhat as multiple rounds of talks between the two have yielded little to no progress, while last week President Joe Biden attended an emergency NATO summit on the matter that yielded a fresh round of sanctions on Russia. Moreover, the markets continue to grapple with the implications of the Fed’s commencement of its monetary policy tightening campaign, along with uncertainty regarding how aggressive the central bank may be following hawkish comments from Fed Chairman Jerome Powell last week.

The advance goods trade balance showed that the February deficit came in at $106.6 billion, versus the Bloomberg consensus estimate calling for it to contract to $106.5 billion from January’s unrevised shortfall of $107.6 billion.

Preliminary wholesale inventories rose 2.1% month-over-month (m/m) for February, compared to expectations of a 1.0% gain, and versus January’s upwardly-revised 1.1% increase.

The Dallas Fed Manufacturing Index declined more than expected but remained in expansion territory (a reading above zero) for March. The index fell to 8.7 from 14.0 in February and compared to forecasts calling for a decline to 11.0. New orders, shipments, and production all decelerated but remained above zero, while employment growth accelerated solidly. Inflation pressures persisted as prices paid for raw materials increased further north of the 70 mark.

Treasuries were mixed after a recent tumble that has lifted yields noticeably amid increased expectations of a more aggressive Fed monetary policy tightening cycle as it tries to combat the surge in inflation. Federal Reserve Chairman Jerome Powell offered a more hawkish tone as of late, vowing strong action on inflation, reiterating that rate increases will continue until the rise in prices is under control, conceding that Fed officials “widely underestimated” how long pricing pressures would last. He also added that the rate hikes could be even higher if necessary, with a move larger than a 25-basis point (bp) increase not off the table.

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