Nasdaq, S&P 500, Dow Jones surge and oil plunges on hopes of Ukraine compromise

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After significant downward pressure in the first two days of the week, stocks came roaring back on Wednesday. News that Ukrainian President Volodymyr Zelensky said he was open to some kind of compromise to end the conflict with Russia sent investors bargain hunting amid hope that the crisis might be nearing an end.

Worries about high oil prices and increased geopolitical risk in the wake of Russia's invasion of Ukraine prompted declines on Monday and Tuesday, leading the S&P 500 to finish below 4,200 for the first time since June of last year. The major averages responded Wednesday with a massive snap back, boosted by sharply lower oil prices.

The Nasdaq (COMP.IND) led the charge, ending the day +3.6%. Meanwhile, the S&P (SP500) concluded +2.6% and Dow (DJI) +2.0%.

Looking at the closing numbers, the Nasdaq posted a gain of 459.99 points, ending the day at 13,255.55. The S&P 500 surged back above 4,200, climbing 107.18 to conclude trading at 4,277.88. The Dow advanced 653.61 points to finish at 33,286.25.

Nine of the 11 S&P sectors finished in the green, with Information Technology, Financials and Communication Services among the best performers. Energy and Utilities were the two declining sectors.

Headlines out of Ukraine spurred the buying. The country is open to neutrality, but will not cede any territory, a top foreign policy aide to President Volodymyr Zelensky told Bloomberg earlier this morning.

Lower crude prices supported the stock market as well, as commodity traders responded to the news out of Ukraine. WTI dropped more than 11% to fall back below $110 per barrel. At the same time, Brent fell about 12%. Rumored Venezuelan sanction relief also placed pressure on oil prices.

In bond trading, the 10-year Treasury yield rose almost 7 basis points to 1.94% and the 2-year gained nearly 4 basis points to reach 1.67%, back to levels of late 2019.

Commenting on the ongoing impact of the conflict, Goldman Sachs said, "The economies of both Russia and Ukraine are likely to see a significant contraction and have already experienced massive pressure on local asset markets."

The firm added: "Despite the severe dislocations in domestic assets, and the painful implications for individual corporates, banks and asset holders, our judgment at this stage is that they are unlikely to have systemic financial spillovers - in part, because the wave of successive sanctions since 2014 have meant that Russian assets are generally a small share of national banking system exposures and of leveraged investor holdings."

Standard Chartered strategist Steve Englander also weighed in on the ongoing impact of the current crisis, saying he sees "a big difference between the current shock and prior shocks."

"The COVID and 2008-09 shocks led to lower demand, commodity prices, inflation and interest rates, at least initially. The current shock acts directly to raise commodity prices and inflation," he noted.

Englander further added: "Central banks are more likely to raise than cut rates; this benefits commodity exporters and is a disadvantage to low-yielding, commodity-importing safe havens. High-beta commodity exporters could still be vulnerable if higher commodity prices led to broad risk-off sentiment and slower global growth or if central banks were to tighten sharply in response to inflation risks. However, this is not our short-term base-case view."

Among active stocks, Caesars Entertainment is among the best performers in the S&P as casinos, airlines and cruise lines outperform as investors look to the recovery again.