Wall Street’s main benchmarks rallied on Tuesday as investors weighed a potential de-escalation of geopolitical tensions between Russia and Ukraine following news some Russian military units will start returning to their permanent bases after completing drills near the Ukrainian border.
The Dow Jones Industrial Average closed 1.22%, or 422.67 points, higher to 34,988.84, while the S&P 500 jumped 1.58%, or 69.40 points, to 4,471.07.
The Nasdaq Composite saw its best day in two weeks, advancing 2.53%, or 348.74 points, to 14,139.76 after the threat of a Russian invasion of Ukraine weighed on markets already grappling with the prospect of swifter monetary tightening by the Federal Reserve. Meanwhile, oil retreated from its highest price since 2014, falling 3.69% to $91.94 per barrel.
Russian President Vladimir Putin said Tuesday he was open to security discussions with the West on negotiating the crisis but emphasized responses from the United States and NATO members to Moscow's security demands failed to meet the Kremlin's requests.
President Joe Biden in a speech on Tuesday said the United States was prepared “no matter what happens.”
“We are ready with diplomacy, to engage in diplomacy with Russia and our allies and partners to improve stability and security in Europe as a whole,” he said. “And we are ready to respond decisively to the Russian attack on Ukraine, which is still very much a possibility.”
Fears that the Kremlin would green-light a move to force in on Ukraine as soon as this week has created a new headwind for global markets worried the conflict could exacerbate inflation and spur other economic disruptions.
“The general consensus is that we are going to be on a high simmer, at least for the foreseeable future,” Raymond James Washington policy analyst Ed Mills told Yahoo Finance Live on Tuesday. “Putin has a lot of incentive to continue the pressure but also to drag this out.”
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The geopolitical tensions add to the uncertainty around central bank policy that has dominated market sentiment in recent months.
Earlier in the session, the U.S. Bureau of Labor Statistics reported its U.S. Producer Price Index (PPI) rose 1%, notching another monthly gain in January and adding to a series of hot inflation prints, reiterating calls on the Fed to raise interest rates.
The print comes after the Labor Department reported last week its Consumer Price Index (CPI) notched a steeper-than-expected 7.5% increase over the year ended January to mark the largest annual jump since 1982.
"Factories are producing more inflation than goods at this point and with supply and labor shortages not going away, inflation is going to stay on the front burner of Federal Reserve officials’ concerns for now," FWDBONDS chief economist Christopher S. Rupkey said in a note.
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"The Fed is going to start moving up interest rates to curb economic demand, but if inflation keeps going, consumers will stop buying all on their own because they can’t afford it." Source: Yahoo Finance