Markets

S&P 500, Nasdaq Rally for a Third Day as Investors Get Comfortable With the Fed's Rate-Hike Plan

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Stocks jumped for a third straight day on Thursday, building on a strong rally this week, as investors digested the latest news out of Ukraine and got comfortable with the outcome of the Federal Reserve meeting.

The Dow Jones Industrial Average traded 417.66 points higher, or 1.2%, to 34,480.76. The S&P 500 popped 1.2% to 4,411.67, and the Nasdaq Composite added 1.3% to 13,614.78.

The moves come after a massive two-day rally for stocks. The S&P 500 jumped more than 3% in the previous two sessions, while the Dow posted back-to-back surges of more than 500 points. The blue-chip index is on pace for its first positive week in six.

"We're on day three of potential gains here, and a lot of investors are going in thinking maybe there are calmer waters," Jeff Kilburg, chief investment office of Sanctuary Wealth, said Thursday afternoon. "The Fed meeting ended up being a non-event, getting past it was a big mental component for the marketplace. As we start to get past it and realize uncertainty in the Russia-Ukraine situation feeds into their formula, it puts a short-term bullish sentiment in the market. It's nice to see a little consistency."

Stocks climbed even after the Kremlin reportedly dismissed news of progress in Ukraine-Russia peace talks. According to Bloomberg News, a Kremlin spokesman those reports were "wrong." The Financial Times reported Wednesday that both countries had made "significant progress" on a peace plan and Russian withdrawal from Ukraine.

Thursday marked a key day for Russia to pay coupons on its sovereign bonds, which were due on Wednesday, to avoid default. Reuters, citing a source familiar with the situation, reported on Thursday that Russia made two payments in dollars and that the money would soon be distributed to bondholders.

Peter Boockvar, chief investment officer at Bleakley Advisory Group, noted the S&P 500 gained after the Reuters report was released.

He added, however, that there are "still a lot of questions about the payments. To what extent do they make payments in dollar bonds instead of rubles? … I don't know what this means for all of their payments."

The debt market drama comes as Russia has largely been cut out of the global financial system as a result of its war in Ukraine. In order to avoid default, Russia needed to make the payments in dollars and not the rapidly weakening ruble, and it was unclear if foreign banks would process the payments or allow Russia to access its accounts.

Global markets have seen wild swings in recent weeks. Sylvia Jablonski, CEO and chief investment officer at Defiance ETFs, thinks volatility will likely continue for at least another month or two. For now, though, she said investors are getting comfortable with the market.

"Investors are starting to see that the market is presenting a tradeable bottom, and so buying now and in coming weeks is a good opportunity to get in on a repriced market with upside potential," she said. "The last time that we had opportunities to buy like this was around the peak of Covid and in 2008."

Energy stocks led the market higher as West Texas Intermediate crude futures, the U.S. oil benchmark, jumped more than 8% to back above $100 per barrel. Devon Energy and Diamondback climbed 9.6% and 6.5%, respectively. The Energy Select Sector SPDR Fund rose 3.4%. The sector is the only one on pace for a down week, but also the only one in positive territory for the year.

American Express led the Dow higher with a gain of more than 3.5% after Bank of America kept its buy rating on the stock.

Health stocks and software companies also posted strong gains. Cardinal Health, up more than 6.3%, was one of the top gainers in the S&P 500. Eli Lilly gained 3.2%. Meanwhile, Intuit rose 3.4%.

Thursday's gains came a day after the Federal Reserve hiked its benchmark interest rate for the first time since 2018 and signaled six more hikes this year, spurring a relief rally in stocks.

DoubleLine Capital CEO Jeffrey Gundlach said Wednesday on "Closing Bell: Overtime" that he expected markets to rally between now and the next Fed meeting in May after selling off sharply to start the year. He pointed to recent high readings on the Cboe Volatility Index, often called Wall Street's fear gauge, as a sign that the selling had gone far enough, at least in the near term.

—CNBC's Pippa Stevens and Jesse Pound contributed reporting.

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