Stock Market Today – 3/22: Stocks Edge Higher, Hawkish Powell Comments Lift Treasury Yields

Updated at 8:42 am EST

U.S. equity futures edged higher Tuesday, while Treasury bond yields extended their recent gains and the dollar consolidated its strength on foreign exchange markets, as investors continue to recalibrate growth and rate hike expectations while tracking developments in Russia’s war on Ukraine.

A hawkish series of comments from Federal Reserve Chairman Jerome Powell yesterday to the National Association for Business Economics revived bets on faster — and deeper — rate hikes over the coming months as inflationary pressures continue to accelerate amid surging commodity prices and supply chain disruptions linked to China’s renewed Covid surge.

“The labor market is very strong, and inflation is much too high,” Powell said. “If we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so.”

Bets on a 50 basis point hike at the Fed’s May meeting jumped to 63.9% following Powell’s speech, according to the CME Group’s FedWatch tool, while benchmark 10-year note yields climbed to 2.344% in overnight trading.

Concerns over the impact of the Ukraine invasion on growth, however, as well as the hit to world demand expected from China’s attempt to stem Covid infections — and the possible emergence of a dangerous BA.2 subvariant in the United States — have short-term rates moving even faster, with 2-year at 2.168%, pegging the spread with 10-year paper at a worryingly low 16 basis points.

The Atlanta Fed’s GDPNow forecasting tool suggests a 1.3% growth rate heading into the final week of the first quarter.

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Oil prices are also holding on to recent gains, powered by ongoing talks related to an embargo on Russian exports into the EU and the weekend attacks on Saudi oil and gas facilities in the Gulf by Iranian-backed Houthi rebels. 

WTI crude futures for May delivery, which are tightly linked to U.S. gasoline prices, were marked 52 cents lower on the session at $109.45 per barrel while Brent contacts for the same month, the global pricing benchmark, slipped 23 cents to $115.35 per barrel.

The U.S. dollar index, which tracks the greenback against a basket of six currency peers, was marked 0.17% higher at 98.669, a move that typically indicates a defensive tone in global markets

Still, stocks held up well in the overnight session, with Asia’s region-wide MSCI ex-Japan benchmark booking a solid 1.2% gain and Europe’s Stoxx 600 rising 0.5% by late-morning trading in Frankfurt even as Russian troops continue their assault on the southern city of Mariupol and Ukrainian president Volodymyr Zelenskiy again pressed for direct peace talks with Russian President Vladimir Putin.

On Wall Street, futures futures contracts linked to the Dow Jones Industrial Average are indicating a 140 point opening bell gain while those linked to the S&P 500, which is down 6.4% for the year, are priced for a 10.5 point move to the upside. The tech-focused Nasdaq Composite is called 7 points higher.

Dow component Nike  (NKE) – Get NIKE, Inc. Class B Report shares were a notable pre-market mover, rising 6% after the sports apparel giant posted stronger-than-expected third quarter profits and said supply chain snarls that had limited U.S. inventories were largely behind it.

Tesla  (TSLA) – Get Tesla Inc Report, too, extended its win streak to a sixth consecutive session — the longest since November of last year — as the carmaker plans to deliver the first-ever Model Y sedan made in its Berlin factory.

The U.S.-listed shares of Alibaba Group Holding  (BABA) – Get Alibaba Group Holding Ltd. Report shares surged 8% higher in pre-market trading after the China-based e-commerce giant boosted its stock buyback plan to a record $25 billion.

Okta Inc.  (OKTA) – Get Okta, Inc. Class A Report shares slumped 8% after the tech group, which manages network access for thousands of U.S. companies, began investigating reports of an illegal data breach. 

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