Before The Bell
U.S. stocks started the week with a steep selloff, but buyers stepped in to fuel an impressive afternoon rally which erased all of the losses.
While fourth-quarter earnings season is just picking up steam, the market’s attention has largely been focused on bigger issues—namely, rising geopolitical tensions, which have contributed to a widespread selloff this year as Russia has gradually positioned more than 100,000 troops at the Ukrainian border. While Russia has repeatedly claimed that it is not getting ready to invade, President Joe Biden and other world leaders believe otherwise. Over the weekend, both the U.S. and the U.K. indicated that they are prepared to initiate economic sanctions if necessary. While directed at Russia, any such moves would also negatively impact the global economy. Meanwhile, NATO announced that it was getting troops ready for a potential invasion, and the State Department suggested that all U.S. citizens should leave Ukraine quickly, putting additional strain on investor sentiment.
Traders are also anxious about the Federal Reserve’s announcement following its policy meeting on Wednesday. While three or four quarter-point rate increases are already expected (likely beginning in March), any suggestion of an earlier start or larger hikes would likely result in a swift negative reaction from the market.
After shedding more than 1,100 points yesterday morning, the Dow Jones Industrials ended the session ahead by 99 points. The broader S&P 500 also staged a dramatic recovery. The index briefly entered into correction territory (broadly defined as a decline of 10% from a recent peak), but it reversed course and ended 12 points in the green. The NASDAQ also took investors on a roller coaster ride, closing the day with a gain of 86 points after being down nearly 5%. Most of the major market sectors ended in the green, led by consumer discretionary (up 1.1%), energy (+0.6%) and industrials (+0.5%). At the other end of the spectrum, utilities were down 1%, while healthcare and consumer staples each slipped by about one-third of a percentage point. Elsewhere, oil prices were down, with light sweet crude falling 1.4%, to about $84 a barrel, on fears of falling demand. Meanwhile, shares in Europe also took a beating. France’s CAC-40 took the biggest hit, falling 4%, while Germany’s DAX didn’t do much better, shedding 3.8%. The U.K.’s FTSE 100 managed to limit losses to 2.6%.
As we look to the new day, stocks in Asia closed down, but the European bourses are showing modest gains. Meanwhile, U.S. stock futures are suggesting a negative open for the indexes, and oil is up slightly.
Looking further ahead, earnings season kicks into higher gear with a number of heavyweight names reporting this week, including Apple (AAPL), Microsoft (MSFT), 3M (MMM), Boeing (BA), and McDonald’s (MCD). Following the Fed’s statement at the conclusion of its meeting on Wednesday, Thursday brings the latest figures for initial and continuing jobless claims, along with December’s tallies for durable goods and core capital equipment orders, as well as pending home sales. The busy week closes out with December reports for inflation and consumer spending, among others.
– Mario Ferro
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
