S&P 500 in Rally Mode on Hopes for Diplomatic Resolution to End War

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S&P 500 in Rally Mode on Hopes for Diplomatic Resolution to End War
Credit: © Reuters.

By Yasin Ebrahim

Investing.com -- The S&P 500 surged Wednesday, led by dip-buying in financials and tech on hopes of a diplomatic resolution to the Russia-Ukraine war after Ukraine said it was open to discussing Russia’s demand for neutrality that could prove key in ending the conflict.

The S&P 500 rose 2.6%, the Dow Jones Industrial Average gained 2.1%, or 677 points, the Nasdaq Composite rose 3.5%.

“U.S. equity markets are rallying this morning, as favorable geopolitical chatter and bargain buying work to reduce oversold chart conditions on benchmarks like the S&P 500,” Janney Montgomery Scott said in a note.

Ukraine reportedly said it was open to discussing Russia’s demand of neutrality in exchange for security guarantees.

The prospect, albeit still very nascent, of a diplomatic resolution to the Russia-Ukraine crisis cooled the run-up in commodity prices including energy, and eased fears about a prolonged impact on global growth.

Technology stocks and financial stocks led the market rebound, with latter boosted by a surge in banks as Treasury yields jumped.

Signature Bank (NASDAQ: SBNY ), Bank of America (NYSE: BAC ), and Fifth Third Bancorp (NASDAQ: FITB ) were up more than 6%.

Big tech also played a role in the broader market melt up, led by Google (NASDAQ: GOOGL ), Microsoft (NASDAQ: MSFT ) and Apple.

Apple (NASDAQ: AAPL ) was up more than 2%, a day after the tech giant unveiled a several new products including a new updated iPhone and revamped M1 chip.

Netflix (NASDAQ: NFLX ) jumped more than 7% after Wedbush upgraded its rating on the streaming company to a neutral rating from underperform.

The decline in oil prices also provided a boost to fuel-sensitive sectors of the market including airlines and cruise lines.

Carnival (NYSE: CCL ), Norwegian Cruise Line(NYSE: NCLH ), American Airlines (NASDAQ: AAL ), and United Airlines (NASDAQ: UAL ) were up sharply.

The rebound in the broader market comes just a day ahead of an inflation report expected to show that consumer prices rose nearly 8% in the 12 months through February.

The economy, however, is expected to remain in good shape despite forecast of slowing growth ahead as the consumer, which makes up about 66% of the economy, has shown little sign of reining in spending.

"The lack of early signs of deterioration in consumer spending like substitutions and trading down [reflects] the ability of the consumer to continue to spend money,"  Sarah Henry, portfolio manager at Logan Capital Management said in an interview with Investing.com on Wednesday. "They're still willing to pay up for all of the things that they were paying for throughout the pandemic."

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