US stock index futures rose on Tuesday before the regular trading session opened after several experts from the US said Russia would not invade Ukraine, reducing geopolitical tensions that have been affecting the stock market lately. Today, the Ministry of Defense of the Russian Federation announced that it had started to return servicemen to their bases of deployment after exercises near the border with Ukraine were completed. Against this backdrop, Dow Jones Industrial Average futures jumped by 366 points or 1%. Futures on the S&P 500 rose by 1.4%, and futures on the Nasdaq 100 added 2%. The S&P 500 is now about 8% below its all-time high.
According to Defense Ministry spokesman Igor Konashenkov, the troops recently deployed in the Southern and Western Military Districts of Russia near the border with Ukraine, have completed their exercises and have already started to gradually return to their military bases and garrisons. Against this backdrop, the price of WTI fell by 3% and the yield on 10-year Treasury bonds jumped to 2.04%.
Some ETFs investing in Russian companies also showed reactions to the news. The VanEck Russia ETF, a US-traded fund investing in large Russian companies, jumped by nearly 5% in the premarket.
However, the geopolitical situation is not enough for the real growth of stock markets. China supports Russia, and relations between China and the US continue to deteriorate very rapidly, which has a huge importance. It is not about a military conflict, but the turn of the Chinese economic policy towards Russia. How this will affect the US relationship with the other economic superpowers is really the question that scares investors, which will eventually have a negative impact on the economy and will obviously affect the future of stock markets. The US inflation data is also important today, namely the US producer price index for January 2022. A monthly increase of 0.5% is expected. Even if the data exceeds economists' forecasts, it is unlikely to seriously affect the indices. The high rate of inflation occurs mainly due to the effects of the pandemic. The US economy is at its high level and has excellent data, so it is only a matter of time before prices return to an acceptable range. Many economists expect inflation to reach its highs as early as the beginning of this year, after which it will begin to decline rapidly - especially with the new monetary policy from the central bank.
Airline and cruise companies were among top gainers today during the premarket. Energy companies suffered the biggest losses due to the drop in oil prices. Apple increased by 1.76% to 171.86, while Tesla jumped by 3.18% to 903.64 before the trading session opened.
Yesterday, the Dow closed with a decline of 171.89 points, or by 0.5%. The S&P 500 dropped by 1.2%, and by the end of the day was down only by 0.4%. The Nasdaq Composite fell by 0.9% at one point before closing just below zero.
St. Louis Fed President James Bullard said that the central bank should act aggressively to curb inflation. Bullard noted that the consumer price index rose last month at the fastest annualized rate since 1982. It also prompted experts from Citigroup and Goldman Sachs to revise their 2022 rate hike forecasts to 7.0%.
As for the technical picture of the S&P500
After a breakthrough of $4,449, bulls are trying to return the price above this level, as well as to keep the price above support at $4,378, which they did quite well yesterday. They were lucky that no interest rate changes were made. A breakthrough of $4,378 would put more pressure on the index and return its bearish sentiment, with the prospect of reaching the lows of $4,312 and $4,265. Bulls may try to make up for Friday's losses today. If the price reaches above $4,449, it is likely to increase appetite for risk, which will open a path to the high of $4,536. This will keep the bull market alive and bring the price back to resistance of $4,598.
