Wall Street attempts to rebound and opens higher

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February 23, 2022
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Wall Street attempts to rebound and opens higher

The New York Stock Exchange opened higher on Wednesday in an attempt to rebound from the previous day’s losses, amid escalating tensions in Ukraine, which sent the S&P 500 into correction territory on Tuesday.

Around 3:00 p.m. GMT, the Dow Jones advanced by 0.53%, the Nasdaq by 0.51%, the broader S&P 500 index by 0.68%.

On Tuesday, the Dow Jones index had dropped 1.42% to 33,596.61 points. The technology-dominated Nasdaq lost 1.23% to 13,381.52 points.

The S&P 500 fell 1.01% to 4,304.76 points, more than 10% below its January peak.

Wall Street recovered after sanctions against Russia were less severe than expected, while a military escalation is not excluded in Ukraine.

Washington attacked on three fronts with a “first tranche” of sanctions: sovereign debt, the financing of military spending through two public banks, and five oligarchs close to Russian President Vladimir Putin.

Germany for its part announced the suspension of the Nord Stream 2 gas pipeline project, which had not yet been commissioned.

“Markets are trading higher this morning after the United States and other countries announced limited sanctions on Russian sovereign debt, banks and certain individuals,” said Shaun Osborne, analyst for Scotiabank.

“While these sanctions so far are not particularly disruptive to the economy or global markets, leaders have made it clear that these are initial steps aimed at deterring further Russian moves into Ukraine,” the analyst added in a note.

For Peter Cardillo of Spartan Capital, the rebound in the New York stock indexes was welcome “after several sessions of decline and the fall of the S&P into the correction zone”.

“It’s good as long as it lasts!”, Commented the analyst, stressing however that the market was “not at the end of its troubles” with the crisis in Ukraine.

The indices were also rebounding for technical reasons after being “somewhat oversold”, according to Mr. Cardillo. An opinion shared by Patrick O’Hare of Briefing.com.

“The optimistic tone of the market has less to do with the news of the day than with the losses of the day before and the previous days”, estimated the analyst.

“In other words, this rebound is quasi-algorithmic”, according to him, while “there has been no improvement in the situation between Russia and Ukraine”.

In the absence of macroeconomic indicators Wednesday, investors remained concerned about the intentions of the US Central Bank (Fed) to raise rates in three weeks.

Yields on 2-year Treasury bills, very sensitive to the prospect of a rise in short-term rates, rose to 1.60% from 1.54%.

“This reflects concerns that a rate hike could lead to slower economic growth,” O’Hare said.

Among the actions of the day, the title of the furniture and DIY chain Lowe’s was welcomed (+5.99% to 227.31 dollars) after announcing a profit and turnover higher than forecast for the fourth quarter. The chain claimed to have gained market share in the do-it-yourself market and raised its projections for the current year.

On the Nasdaq, cybersecurity firm Palo Alto Networks was sparking (+6.40% to $505.95) after posting sales up 30% and raising its profit and revenue forecasts for the full year in a context of high demand for cybersecurity.

Securities of cybersecurity firms were generally on the rise as the risk of computer attacks “sponsored by organizations linked to the Russian state” increased with the situation in Ukraine, noted Dan Ives, analyst for Wedbush.

In the wake of Palo Alto Networks, Zscaler climbed for example by 3.17%, CyberArk Software by 2.16%, Fortinet by 1.55%.

The TJX group, owner of the Marshalls store chains, plunged 6.47% to 60.93 dollars. The store traffic affected in the last quarter by the spread of the Omicron variant led the group to produce worse than expected results.