Market Snapshot: U.S. stocks close sharply higher, S&P 500 exits correction territory on optimism about Ukraine talks

What drove markets?

Stocks ended higher Tuesday, as investors seemed encouraged by negotiations aimed at ending the Russia-Ukraine war as well as a decline in commodity prices.

Talk of a chance for a cease fire “is pumping more optimism into the market,” said Shep Perkins, chief investment officer for equities at Putnam Investments, in a phone interview Tuesday. 

The first face-to-face talks in two weeks between Russia and Ukraine were held in Turkey on Tuesday. Both sides described the negotiations as constructive, though no immediate breakthroughs were produced, The Wall Street Journal reported.

Russia’s military also said Tuesday it would “fundamentally” cut back operations near Ukraine’s capital and a northern city, potentially a significant concession by Moscow since it invaded its neighbor more than a month ago.

“A sense of positivity returned to financial markets as the prospects of more cease-fire talks between Russia and Ukraine soothed investor jitters,” said Lukman Otunuga, senior research analyst at FXTM.

See also: War in Ukraine: New round of talks in Istanbul aims to stop the fighting

The dollar
USDRUB,

plunged against the ruble, and oil prices
CL.1,
-0.74%
dropped, as reports began to emerge after the day’s meetings in Istanbul, Turkey.

Although oil prices remain elevated, their decline from even higher levels has taken “a little of the pressure off inflation,” said Putnam’s Perkins. West Texas Intermediate Crude for May delivery
CLK22,
-0.74%
declined 1.6% Tuesday to settle at $104.24 a barrel, the lowest finish for a front-month contract since March 17, according to FactSet data.

Meanwhile, wheat futures
W00,
-4.14%
dropped Tuesday as traders reacted to news of potential progress in negotiations between Ukraine and Russia. Both countries are significant suppliers of wheat.

See: Wheat futures log lowest finish in a month on reports of progress in Ukraine-Russia talks

The equity market is responding to “improvement” in some commodity prices that had been “extremely extended,” said Tony Roth, chief investment officer at Wilmington Trust, in a phone interview Tuesday. Commodity prices have fallen on optimism surrounding potential progress in talks to end the Russia-Ukraine war, as well as a slowdown in China as it continues its “zero-Covid policy” with shutdowns.

“The situation in Ukraine and the situation in China are coming together to moderate commodity prices,” Roth said. Widespread shutdowns in China weigh on consumption in the country while slowing its utilization of commodities, he said.

A two-phased lockdown of the financial capital Shanghai entered the second day, raising the prospect of more supply chain disruptions hitting the world economy.

In U.S. economic data, the Conference Board’s index of consumer confidence rose to 107.2 in March and increased for the first time in 2022, even as Americans remain uneasy about high inflation and the economic fallout from the war in Ukraine. Economists polled by The Wall Street Journal had forecast the index to rise to 107.5.

Employment trends could be partly behind the improved sentiment, according to Perkins. “The labor market is very strong,” he said. “We know that people are changing jobs, presumably to get raises.” Data on job openings and labor turnover showed the quitting rate rose to 2.9% in February, from 2.8% in January, according to the U.S. Department of Labor.

Read: Another 4.35 million U.S. workers quit — most for better jobs

In other economic data released Tuesday, the S&P CoreLogic Case-Shiller 20-city house price index posted a 19.1% year-over-year gain in January, up slightly from 18.6% the previous month.

An uptick in 30-year mortgage rates should help cool the hot housing market, according to Perkins. He said some slowing in home-price growth would be “well received” by the equity market as it would take some pressure off “the inflation picture” broadly worrying investors.

“As the Fed embarks on what appears likely to be an extended rate hike cycle and financial conditions tighten, consumers are increasingly wary of the outlook for the economy in the latter half of the year and into 2023,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors, in emailed comments.

“Can policy makers thread the needle to cool the economy and bring inflation pressures down to a more palatable level without choking off growth? That’s the challenge before the Fed and a tall order for policy makers who will attempt to navigate the economy to a soft landing,” he wrote.

Wilmington moved to a “neutral” weighting for equities across developed markets at end of last week, from a previously “overweight” position, according to Roth.

“In our view, the markets are not taking into account the risks around inflation sufficiently, and the risks that are associated with much tighter monetary policy,” he said. “Even though we don’t see a recession this year, we do see a good chance of recession next year—and that’s not priced into the market yet.”

Which companies were in focus?

FedEx Corp.
FDX,
+3.70%
founder Fred Smith late Monday announced plans to step down from the chief executive role, and will be replaced by the logistics company’s president and chief operating officer. FedEx shares rose 3.7%.

Shares of Robinhood Markets Inc.
HOOD,
+24.20%
jumped 24.2% after the trading app said it would extend the hours that its customers could trade and was working toward 24/7 trading.

Shares of popular meme stock GameStop Corp.
GME,
-5.11%
fell 5.1%, snapping a record-matching 10-day winning streak.

UnitedHealth Group Inc.’s
UNH,
-0.48%
Optum Health confirmed it would buy post-acute healthcare services company LHC Group
LHCG,
+5.93%
in a deal that values LHC Group at more than $5.5 billion. LHC Group shares climbed 5.9%, while shares of UnitedHealth edged down 0.5%.

Shares of Dave & Buster’s Entertainment Inc.
PLAY,
+14.87%
jumped 14.9% after the games-themed restaurant chain’s quarterly results released late Monday fell below Wall Street expectations.

Nielsen Holdings PLC
NLSN,
+20.31%
shares surged 20.3%, after the audience measurement company confirmed a deal to be acquired by a private equity consortium in a cash deal valued at about $16 billion, including debt.

NeoGenomics Inc.
NEO,
-29.79%
Chief Executive Mark Mallon stepped down Monday as the health-testing company revealed that first-quarter financials will miss guidance and rescinded its forecast for the full year. Shares plunged 29.8%.

How did other assets fare?

The yield on the 10-year Treasury note
TMUBMUSD10Y,
2.400%
fell 7.7 basis points to 2.399%. Yields and debt prices move opposite each other.

The ICE U.S. Dollar Index
DXY,
-0.67%,
a measure of the currency against a basket of six major rivals, fell 0.7%.

Gold futures ended lower, with gold for April delivery
GCJ22,
-1.10%
falling 1.4% to settle at $1,912.20 an ounce.

Bitcoin
BTCUSD,
+0.14%
was down 0.6% at $47,650.

In European equities, the Stoxx Europe 600
SXXP,
+1.74%
closed 1.7% higher, while London’s FTSE 100
UKX,
+0.86%
gained 0.9%.

In Asia, the Shanghai Composite
SHCOMP,
-0.33%
fell 0.3%, while the Hang Seng Index
HSI,
+1.12%
in Hong Kong and Japan’s Nikkei 225
NIK,
+1.10%
each rose 1.1%.

––Steve Goldstein contributed to this report.