LIVE MARKETS U.S. stocks rebound to end higher, led by tech rally

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U.S. STOCKS REBOUND TO END HIGHER, LED BY TECH RALLY (1600 EST/2100 GMT)

Wall Street staged a dramatic rebound to end sharply higher on Thursday, led by tech stocks, which had earlier dropped to 11-month lows.

Investors were rattled after Ukrainian forces battled Russian invaders on three sides on Thursday after Moscow mounted an assault by land, sea and air in the biggest attack on a European state since World War Two. read more

The Biden administration announced sweeping export restrictions against Russia in response, but did not impede Russia’s access to the SWIFT international banking system. read more

The White House has warned Americans that the conflict could lead to higher fuel prices in the United States, but U.S. officials have been working with counterparts in other countries on a combined release of additional oil from global strategic crude reserves. read more

The Nasdaq Composite (.IXIC) led gains, rising by around 3%, followed by the Russell 2000 (.RUT) and the S&P 500 (.SPX), which each increased by more than 2%. The Dow Jones Industrial Average (.DJI) made only modest gains.

Of the 11 major S&P 500 sector indices, seven ended the day higher, led by information technology (.SPLRCT), communication services (.SPLRCL) and consumer discretionary (.SPLRCD). Consumer staples (.SPLRCS), financials (.SPSY) and energy (.SPNY) were the weaker performers.

The S&P 500 officially entered into correction territory on Tuesday by closing 10% below its peak reached in Jan. The Dow Jones Industrial Average was on track to join in on Thursday, but evaded the designation after stocks rebounded. The Nasdaq Composite also avoided officially entering into a bear market, after being down more than 20% from its Nov. record close at the open.

Here is your closing trade snapshot:

(Karen Brettell)

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YEN FACES HEADWINDS DESPITE SAFE HAVEN APPEAL (1340 EST/1840 GMT)

The Japanese yen is likely to continue to face headwinds as Japan’s central bank maintains a more dovish stance than peers, even after the currency briefly hit three-week highs on Thursday on safe haven buying.

The currency reached 114.39 against the U.S. dollar on Thursday, the strongest since Feb. 3, before fading back to 115.31.

The rally was “a knee-jerk reaction,” Kit Juckes, head of FX strategy at Societe Generale said in a note on Thursday. “The global tide of tighter monetary policy will force capital outflows as soon as any calm returns, and energy dependency leaves it vulnerable to triple-digit oil prices.”

The Bank of Japan is more dovish than peers as the country faces more modest growth and inflation, while the U.S. Federal Reserve is expected to aggressively hike rates to stem rising price pressures.

Higher U.S. Treasury yields are likely to boost the dollar as the Fed raises rates and shrinks its balance sheet.

Wells Fargo economists Nick Bennenbroek, Brendan McKenna and Jessica Guo also view the yen as likely to underperform on divergent central bank policy.

“Geopolitical tensions and market volatility is offering some support to the yen for now. But even given fiscal stimulus, a renewed uptick in COVID cases has seen a soft start for growth this year, while inflation is benign,” they said in a note sent on Wednesday.

“That is keeping the Bank of Japan firmly in the easy monetary policy camp, which should see the yen underperform,” they said.

(Karen Brettell)

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S&P 500 VALUATIONS STARTING TO LOOK NOT HALF BAD (1232 EST/1732 GMT)

With the S&P 500 (.SPX) now down nearly 13% from its January record high close, the benchmark's valuations are beginning to look more attractive than they have in years.

The world's most watched stock index this month is trading at a forward price/earnings ratio of under 20 for the first time Wall Street recovered from the coronavirus selloff of early 2020.

The S&P 500's bottomed out at about 14 times expected earnings at the depths of the stock market route in March 2020, and quickly soared to 23 by September of the same year. The S&P 500 had a forward PE of 19 in February 2020 on the eve of the coronavirus selloff, cheaper that its current valuation even after the index's recent tumble, which has been driven by fears of rising interest rates and uncertainty about the conflict between Russia and Ukraine.

The S&P 500 on Thursday was last down 1.4% following Russia's invasion of Ukraine.

For long-term investors or those looking for income streams, S&P 500 dividends are also looking more attractive these days. The index's dividend yield is now at about 2%, the highest since 2019. That's just above the 10 year U.S. Treasury , on Thursday yielding 1.93%.

(Noel Randewich)

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S&P 500 INTERNALLY BATTERED, BUT RIPE FOR A COMEBACK? (1215 EST/1715 GMT)

Early in Thursday's session, the S&P 500 index (.SPX) was down more than 14% from its early-January record close.

Even with these losses, the benchmark index has been holding up better than the Nasdaq Composite (.IXIC). Indeed, at Thursday's open, the IXIC was off nearly 22% from its November record close.

Both indexes have since snapped off their lows, and in fact, the Nasdaq is now green on the day. The SPX is still off around 1%.

Meanwhile, even though the SPX has seen a less severe drop from its highs than the Nasdaq, internally the index has certainly been beaten up. On Wednesday, 70% of S&P 500 stocks were down more than 10% from their highs. read more

Also on Wednesday, according to Refinitiv data, the percentage of SPX stocks above their 50-day moving average fell to 25.2%, or its lowest level since September 2020:

On Thursday, this reading is ticking up slightly to 25.4%.

Since the market's December 2018 bottom, the percentage of S&P 500 stocks above this closely watched intermediate-term moving average has seen numerous troughs between 22.2% and 32.2%. From this range, the measure then improved.

Therefore, if this pattern is to continue, current readings may be at, or near, washed-out levels.

Of note, however, when the S&P 500 bottomed on December 24, 2018, this measure nearly hit zero, at 0.59%. It fell to a low of 1.2% seven trading days ahead of the S&P 500's March 23, 2020 low.

(Terence Gabriel)

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WORST DAY SINCE COVID-19 CRASH FOR EURO ZONE BANKS (1202 EST/1702 GMT)

Russia's invasion of Ukraine inflicted a violent blow to euro zone banks which just experienced their worst day of trading since the COVID-19 March 2020 market crash.

The sector's index plunged 8%, well over the double of the 3.2% loss sustained by the pan-European STOXX 600.

Shares in European banks saw all their 2022 gains evaporate as investors rushed in to buy German government bonds, pushing yields lower.

Banks identified by traders as being the most exposed to Russia suffered spectacular falls, such as -23% for Austria's Raiffeisen, -13.5% for Italy's Unicredit, -13% for Germany's Commerzbank and -12% for France's Societe Generale.

Oil and gas stocks were the best performing sector, even briefly pulling off some gains during the session.

The sector's index closed down only 0.3% amid surging oil prices.

Other stocks which got a big boost included renewable energy with the prospect of lower gas and oil imports from Russia.

Vestas Wind jumped 11% while defence groups such as Thales or BAE also rose around 5%.

(Julien Ponthus and Joice Alves)

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COULD INFLATION SURGE BE ENOUGH TO TIP US INTO RECESSION? (1100 EST/1600 GMT)

Russia’s invasion of Ukraine has sent oil prices soaring, adding to fears that surging inflation could in and of itself send the United States and other global economies into a recession.

Russian forces invaded Ukraine on Thursday, and the United States and Europe have promised the toughest sanctions on Russia in response. Oil prices rose above $105 a barrel for the first time since 2014. read more

The rise in commodity prices will “exacerbate still further the markets’ concerns on the current nose-bleed levels of inflation – especially juxtaposed with the recent renewed hawkish tone of central banks, particularly the Fed,” Albert Edwards, strategist and self-described “uber bear” at Societe Generale said in his latest dispatch.

The Federal Reserve is facing pressure to raise rates to stem inflation that was already surging before the latest move, but some investors fear it has waited too long to act and now risks tightening into a slowing economy.

The U.S. Treasury yield curve has flattened as investors price in at least six rate hikes by next Feb., and is now at historically flat levels compared to when the U.S. central bank began previous tightening cycles.

“It is unprecedented for the Fed to start a tightening cycle when the yield curve is already so flat. Bond investors are telling us something,” Edwards said. “The recent surge in commodity prices may be sufficient in itself to tip the global economy into recession and hence may prove to be more deflationary than inflationary – much to the surprise of most commentators. The markets may be sensing this.”

Analysts at BMO Capital Markets, meanwhile, flagged the risks of stagflation.

“This puts the performance of inflation solidly back into the limelight – not as a sign there is too much money in the system that the Fed needs to reabsorb; rather as a risk that higher prices with the backdrop of heightened geopolitical uncertainty will ultimately be stagflationary. An energy crisis is the most direct path to stagflation; and an unfortunately familiar one,” BMO analysts Ian Lyngen and Benjamin Jeffery said in a note.

(Karen Brettell)

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HOW MUCH CAN THE DAX FALL FURTHER? ASK THE OPTIONS MARKET (1022 EST/1522 GMT)

With a full-blown Russian invasion of Ukraine under way investors are bracing for more turbulence as the West prepares severe sanctions in response, but key question now for markets is how big is the downside potential.

Option markets may have an answer.

Let's take the German DAX (.GDAXI) benchmark index, whose constituents' reliance on Russian energy imports makes it a good proxy to measure Russian stress on the Old Continent.

The strike prices of the seven most traded put options with a March expiry are as low as 12,000 points , suggesting some investors are buying protection against a drop of at least 14% from current levels of around 14,000 points.

Narrowing down to the top three traded puts, the downside potential implied by the lowest strike price falls to around 10% or more.

(Danilo Masoni)

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U.S. STOCKS SLIDE AS RUSSIA INVADES UKRAINE (0955 EST/1455 GMT)

U.S. stocks are sharply lower on Thursday after Russia invaded Ukraine. The Nasdaq is flirting with bear market territory.

Russian forces assaulted Ukraine by land, sea and air in the biggest attack by one state against another in Europe since World War Two. Oil prices rose above $105 a barrel for the first time since 2014. read more

The S&P 500 (.SPX) officially entered into correction territory on Tuesday by closing 10% below its peak reached in Jan. Now, the Dow Jones Industrial Average (.DJI) looks poised to officially join in after it ended down 9.97% from its record high close on Wednesday. The Nasdaq Composite is flirting with a loss of 20% from its Nov. high. It now remains to be seen where these indexes will close. read more

All of the 11 major S&P 500 sector indexes are in the red, with weaker sectors including financials (.SPSY), materials (.SPLRCM) and consumer discretionary (.SPSY).

Here is your early market snapshot:

(Karen Brettell)

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U.S. STOCKS POISED FOR A ROUGH OPEN (0900 EST/1400 GMT)

U.S. equity index futures are sharply lower in premarket trade, suggesting the major indexes are poised for deep opening losses.

This, after Russia launched an all-out invasion of Ukraine, stock markets around the world slid, oil prices broke above $100 a barrel, and safe havens gold and government bonds surged in the flight to safety.

Indeed, CME e-mini S&P 500 futures are off more than 2%, while e-mini Nasdaq 100 futures are plunging nearly 3%.

Of note, the Nasdaq 100 index (.NDX) ended Wednesday down 18.5% from its November record close. Therefore, given futures' action, the NDX has the potential to enter bear-market territory in the early throes of Thursday's session.

With this, the Nasdaq Composite (.IXIC), which ended Wednesday down 18.8% from its record close, should also come under heavy pressure at the open, and also fall into bear-market territory. The IXIC last suffered a bear market when it plunged 30% on a closing basis in the February/March 2020 pandemic panic.

If the Composite ends down on Thursday, it will be a sixth-straight day of declines. The IXIC last fell six days in a row in late-July/early-August 2019. It last fell more than six-straight days when it declined nine days in a row in late-October/early November 2016. Thus, the IXIC may be stretched to the downside. Interestingly, throughout the pandemic panic bear market, the Composite saw no losing streaks of more than four days.

In any event, with premarket weakness, Nasdaq 100 futures have neared the 13,000 level. Support is at the May 2021 low (12,896.50) and the 38.2% Fibonacci retracement of entire March 2020/November 2021 advance (12,873.57):

The March 2021 low was at 12,176.25. The 50% retracement is at 11,671.50.

As stands, the daily RSI is plunging to around 23, but still above its late-January trough of 17.533.

Traders will be eying action vs support and the behavior of momentum oscillators closely - click here: read more - as well as market internal measures: read more

Here is your premarket snapshot:

(Terence Gabriel)

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FOR THURSDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EST/1400 GMT - CLICK HERE: read more

Terence Gabriel is a Reuters market analyst. The views expressed are his own

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