Shares on Wall Street staged a huge comeback from big declines on Thur. The Dow Jones Industrial Average gained 92.07 pts or 0.28%, to close at 33,223.83, erasing an 859-point decline. The S&P 500 index rose 1.5%. The Nasdaq Composite advanced 3.35%. The small cap Russell 2000 gained 2.67%.
Here are the three most common explanation for the rebound:
1) Sell the rumour buy the news. Russia launched a full scale invasion of Ukraine. That was worst case scenario. The news may therefore not get substantially worse.
2) New US/European Union sanctions were not as draconian as feared, with no sanctions on Russia's commodity exports. Energy prices came way down off their session highs. Russia was not removed from the SWIFT payment system, despite UK Prime Minister Boris Johnson pushing for it.
3) The geopolitical turmoil makes the Fed less likely to raise rates 50 basis points at its Mar meeting. The likelihood of a 0.5% interest rate hike in Mar is down to 13.3%, according to CME Group data.
Beat up tech stocks led the gains. ARK Innovation ETF (ARKK US) rose 7.79%. However, even with that jump, Cathi Wood’s main investment vehicle is still down 32% ytd.
The stocks such as Crowdstrike (CRWD US, +13.01%) and Palantir (PLTR US, +13.42%) which had the twin theme of being beat up and benefiting from increased US Defence Department and cybersecurity spending, flew higher
Early in the day, when worries about the Ukraine were most intense, the yield of the 10-year Treasury note slipped to 1.86%. The 10-year finished trade down just 2.79 basis points (bps) at 1.9633%.
Lower yields kept a lid on bank stocks. Bank of America (BAC US, -2.64%) and JP Morgan (JPM US, -2.78%) were not able to climb out of the red.
The most actively traded US gold futures (Apr) contracts settled up $15.90, or 0.8%, at US$1,926.30/oz. The ICE dollar index (DXY), which measures the strength of the greenback against a basket of currencies, rose 0.98% to 97.137.
The front-month Brent and WTI futures closed up $2.24 at US$99.08/bbl and 71 cents at US$92.81/bbl respectively.
European equity markets had closed before the big rebound began on Wall Street. The UK FTSE lost 3.88%, France's CAC 40 fell 3.83%, while the German DAX retreated 3.96%.
European countries are expected to dramatically increase their defense spending. French aerospace company Thales (HO FP, +4.87%), British defense contractor BAE Systems (BA/ LN, +5.16%) and German automotive and arms manufacture Rheinmetall AG (RHM GR, +7.84%) all outperformed.
The VanEck Russia ETF (RSX US) a US-traded security which invests in top Russian companies, plunged 19.09%.