The S&P 500′s 2% Drop Last Week? Nearly Gone

The market decided to let the good times roll today as Microsoft (MSFT), Pfizer (PFE), United Steel (X) and Fossil Group (FOSL) led the major benchmarks higher.

AFP

The Dow Jones Industrial Average rose 102 points, or 0.6%, to 16,349. The S&P 500, meanwhile, gained 0.7% to 1,872, and is now up 1.7% this week. That means the S&P 500 is just 0.3% away from erasing last week’s 2% loss–and trading a new all-time high.

Microsoft rose 3.9% to $39.55 after announcing that it would host an event on mobile and cloud computing on March 27. Pfizer, meanwhile, gained 1.6% to $31.93. US Steel surged 5.4% to $25.50 on signs of higher steel prices, while Fossil Group advanced 4.6% to $118.04 after it said it would team up with Google (GOOG) for Android Wear. Google gained 1.6% to $1,211.26.

Chalk up today’s gains up to a weak inflation print, which should give the Federal Reserve cover to keep tapering but remain dovish for the long run if it desires, and to Vladimir Putin’s pledge not to annex any more of the Ukraine. Count U.S. Bank Wealth Management’s Jim Russell among those skeptical that Russia’s territorial ambitions have been sated. “It was too easy,” he explained in an interview today. Don’t be surprised if there were more land grabs to come in the future from Russia and perhaps even China, Russell added.

CRT Capital’s Ian Lyngen, meanwhile, tells us what to expect from the Fed tomorrow:

…we are probably going to see the 6.5% UNR threshold eliminated which in light of the 1.1% CPI print just received could give the market a bit of pause over the hiking cycle even as tapering becomes an increasingly old, and ignored, story…Also on our FOMC plate is the chance that the Fed makes mention that perhaps 4% is not the appropriate long-term level for Funds but it's rather something lower. We don't put a lot on this, but at least see more risk to lower that than adding to it…

[We're] nuancing some of the subtle changes which in reality are not at all new information or insights – the Fed never was committed to a 6.5% threshold for UNR and inflation has and remains way under any target – but simply to acknowledge it all with the change in language, dots, and maybe even the longer-term appropriate levels of Funds.

Don’t expect buybacks to continue pushing stocks higher, Barclays’ Barry Knapp noted in a report last Friday. He writes:

While it's no revelation that investors are clamoring for company cash hoards, investors are showing some signs of a shift in preference from cash distribution to cash investment. Anecdotes include a survey from our US Building Products and Homebuilding team, which shows a preference for acquisitions at the expense of dividend. In addition, a basket of the highest repurchasing yield stocks has underperformed since the beginning of the year. While these themes don't represent a sea change in corporate behavior, coupled with the increase in capex and rise in M&A, we would describe this situation as nearing an inflection point in investment.

We’ll keep on waiting.