U.S. stock-market investors shook off an unprovoked Russian invasion of Ukraine to end decidedly in positive territory on Thursday.
The Nasdaq Composite Index
COMP,
for example, had fallen by 3.45% at its lows of the session but clawed back to a gain of over 3%, driven higher by large-capitalization information technology stocks and notable gains in the cybersecurity sector.
The last time the tech-heavy index staged a comeback of this magnitude was Jan. 24, 2022 when it fell 4.90% at its low, but closed up 0.63%, according to Dow Jones Market Data.
In fact, there have only been eight trading sessions in which the Nasdaq Composite was down at least 3% on an intraday basis, but ended the day higher (not including today).
The Nasdaq Composite’s turnaround also reflect a broader reversal from a very bearish tone for markets for the S&P 500
SPX,
and the Dow Jones Industrial Average
DJIA,
even if the index finished once again on the brink of correction territory. The Dow industrials were down 859.12 points at Thursday’s nadir, or 2.6%, and the S&P was down 2.55% at its lows.
Investors scooped up shares in the tech sector
SP500.45,
and communication services
SP500.50,
both up by around 2.8%, at last check. Gains there contributed to the bounce back, which also saw yields for the 10-year Treasury note
TMUBMUSD10Y,
rise to 1.969, after hitting a low around 1.85%.
So why the turnaround?
Not so SWIFT
The frenzied action on Wall Street came after Russian President Vladimir Putin said the U.S. was leveling fresh sanctions on Moscow, including Russian banks, the country’s elites and its largest state-owned enterprises.
“Putin is the aggressor. Putin chose this war, and now he and his country will bear the consequences,” Biden said during a speech at the White House Thursday afternoon.
Market participants, however, may have taken solace in the fact that Biden hasn’t yet booted Russia out of the SWIFT payment network. SWIFT, which stands for the Society for Worldwide Interbank Financial Telecommunication, is a payments-related messaging service that helps banks world-wide execute financial transactions.
Although, such a move may come, keeping Russia in the Swift network may avoid hurting other members of the network which could have hurt some economies in Europe.
Buy the dip?
Investors also could be bargain hunting, or buying the dip, which is a risky proposition because the developments in Kyiv aren’t yet clear and could evolve into Moscow targeting neighboring countries, if he is bent on restoring Soviet-era bloc in Eastern Europe.
“It is a pretty remarkable turnaround through,” Randy Frederick, managing director at Schwab Center for Financial Research, told MarketWatch.
Schwab’s Liz Ann Sonders told CNBC that she doesn’t think the market is out of the woods but believed that algorithmic, or computer-driven, trading may have been contributing to the reversal. It is probably some version of “buy the rumor sell the fact,” she said.
The technicals
Investors might also have responded to so-called oversold conditions present in the market that ultimately gave way to a flurry of technical buying. Near midday Thursday, the Arms Index, which is a volume-weighted breadth measure, suggested there is no panic in the stock market’s selloff with signs of opportunistic buying emerging even at that point.
MarketWatch’s Tomi Kilgore noted that earlier this week that the Relative Strength Index, or RSI, a momentum indicator that measures the magnitude of recent gains against the magnitude of recent declines, was still above its January low for the S&P 500, despite a slide into correction.
He wrote that when prices make new lows but overbought/oversold oscillator indicators make higher lows the pattern is referred to as “bullish divergence,” and suggested a downtrend may be running out of steam.
Kilgore note that another positive sign from the RSI indicator is that it remained above what many chart watchers view as the oversold threshold of 30.