Rate-hike fears abate but Ukraine muddies Wall Street outlook

Rate-hike fears abate but Ukraine muddies Wall Street outlook

Reuters / New York

Geopolitical worries are clouding the outlook for US stocks, even as Russia’s invasion of Ukraine moderates expectations for how aggressively the Federal Reserve will tighten monetary policy in coming months.

Concerns over the conflict weighed on the S&P 500 on Friday, as the index pared a rally that has seen it rise 5.2% from its February 24 intraday low.

The see-saw moves come as investor hopes that the Fed may raise rates less severely than anticipated vied with worries about inflation and higher commodity prices, stoked by sanctions against Russia, one of the world’s biggest commodity exporters.

Investors have virtually priced out the chances of a hefty 50 basis point rate hike in March, giving a lift to the technology and growth stocks that had been pummelled in recent weeks by anticipation of harsh Fed tightening.

Among those, shares of software company Adobe was up over 5% since last week, with Microsoft up over 3% in the same period.

“The stock market has been buoyed by expectations for a less aggressive Fed and lower yields in aggregate.

The threat of higher interest rates has receded somewhat,” said Brad Neuman, director of market strategy at Alger.

The impact of moderating yields has