US stocks closed higher on Tuesday, albeit well off their session highs. Further data pointing to a moderation in inflation and strong earnings from Walmart helped allay concerns about the geopolitical situation in Europe.
All three Wall Street indices opened higher and were solidly green throughout the morning and afternoon. They quickly began to trim profits in the afternoon — with the Dow and S&P even reversing course — on reports that the Polish prime minister had called for an urgent meeting on national security and defense matters amid heavy missile strikes by Russia in Ukraine. A US official reportedly said missiles had entered Poland. The price of crude oil peaked in the reports and then retreated.
The stock then recovered to end in positive territory.
The tech-heavy Nasdaq Composite (COMP.IND) Closed 1.45% higher at 11,358.41 points. The benchmark S&P 500 (SP500) ended 0.87% at 3,991.73 points. The blue chip Dow (DJI) added 0.17% settle at 33,592.92 points.
The Nasdaq was previously up as much as 2.65%, while the S&P and Dow were up 1.81% and 1.34%, respectively.
Nine of the 11 S&P sectors closed in the green, with communications services and technology the biggest gainers. Healthcare and Materials were the two sectors that fell.
Rates ended the session lower. The 10-year Treasury yield (US10Y) fell 10 basis points to 3.77%. The 2-year yield (US2Y) fell by 6 basis points to 4.35%. The dollar index (DXY) was 0.4% lower at 106.50.
“Following the lower-than-expected CPI, October’s PPI only confirmed that the Fed was able to curb its enthusiasm for 75 basis point hikes at the December FOMC meeting. While the PPI was upbeat for equities, there was news of a Russian missile strike and fatalities in Poland, a NATO member, reminded markets of the current geopolitical turmoil,” said Andrew Hecht, a Seeking Alpha contributor.
“President Biden and Xi may have had a cordial meeting at the G-20 summit, but Russian aggression threatens world peace and market stability. Expect a lot of price swings as we move into a time when selling tax losses in a bearish year would can magnify market movements,” Hecht added.
Earlier in the day, the October producer price index for the month came in at +0.2% versus the consensus figure of +0.5% and +0.2% in previous readings. Core PPI remained unchanged, below the predicted +0.4% figure. This was the second inflation report after last week’s CPI reading that showed an overall moderation in prices, providing further arguments for the Federal Reserve to slow its aggressive pace of rate hikes.
“In light of (Fed) Vice Chair Brainard’s two recent speeches in which she highlighted the potential room for margin compression to reduce inflation, this is an important report. The massive expansion of margins during the pandemic explains most of the overshoot in core consumer inflation, relative to unit labor costs, but the Great Margin Recompression, which follows the improvement in supply conditions, is now clearly underway,” Pantheon Macro said in a note.
In other economic data, the New York Fed released the Empire State Manufacturing Index for November, which came in at 4.5, higher than the expected -5.
In earnings news, Walmart (WMT) rallied after reporting a strong quarter, helping other retail stocks recover. Another Dow 30 asset, Home Depot (HD), won on its merits. Singapore-based Internet company Sea (SE) rose nearly 40% as investors cheered the results.
Among other things, US-listed Chinese technology stocks gained on optimism about more frequent talks between President Joe Biden and Chinese leader Xi Jinping. JD.com (JD), Baidu (BIDU) and Alibaba (BABA) finished 7-11% higher. Bilibili (BILI) added more than 27%.
Taiwan Semiconductor (TSM) gained more than 10% after Warren Buffet’s Berkshire Hathaway (BRK.A) (BRK.B) disclosed a stake in the chipmaker. The news also helped other semiconductor stocks.