Stocks rallied Tuesday following a recall of troops from Russia’s border with Ukraine. The S&P 500 surged to a record closing high, and the Dow industrials had their best day since December. All 10 sectors of the S&P 500 participated in the rally, and the Nasdaq rose 1.8% — its biggest one-day rally in five months.
Safe-haven assets plunged as buyers rushed to risk-based assets, and those who shorted the market rushed to cover. Gold fell 0.9%, and the yield on the 10-year Treasury note rose to 2.69% from a one-month closing low of 2.61% on Monday. Crude oil futures fell 1.5% to $103.33 a barrel.
At the close, the Dow Jones Industrial Average gained 228 points at 16,396, the S&P 500 rose 28 points to 1,874, and the Nasdaq jumped 75 points to 4,352. The NYSE’s primary market traded 18 million shares with total volume of 3.7 billion shares, and the Nasdaq crossed 2.4 billion shares. Advancers outpaced decliners by 4.8-to-1 on the Big Board and by 4.6-to-1 on the Nasdaq.
The Nasdaq and Russell 2000, representing mid- and small-cap stocks, broke to new highs Tuesday with spectacular breakaway gaps. The market’s response to a relaxation of geopolitical tensions was led by this group of stocks, which has forged ahead and set the pace for every rally in the past 18 months. Support for both indices is at their respective January highs.
Conclusion: From a technical viewpoint, Tuesday’s resounding reversal from Monday’s politically charged sell-off could not look better. The hefty buying was more than just the result of short covering, although there was a lot of that. Total volume was very high and breadth at almost 5-to-1 is textbook bullish reversal fodder.
On Monday, I cautioned that the failure of the Nasdaq and Russell 2000 to make new highs, along with mediocre volume and breadth, and the Russian incursion into Ukraine, were reasons enough to stand aside. But Tuesday’s powerful response to Russia’s pullback puts us firmly on the bullish side again.
As pointed out, it is unusual for a geopolitical crisis to cause permanent damage, and Tuesday’s tape action underscored that premise. Yes, there was a “geopolitical whipsaw,” as The Wall Street Journal put it, but it caused minor technical damage and put “super bull” back on the field, ready to leap tall fences.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
