News from Eastern Europe, and its ramifications for global business, continues to steer the markets. On that front, although talks between Russia and Ukraine continue, there’s been no progress. Ukraine officials rejected Russia’s ultimatum to surrender its port city of Mariupol, where thousands of civilians remained trapped. Also, there have been reports of increased activity from Russian warships in the Black Sea. Meanwhile, with the European Union considering a ban on Russian oil imports, West Texas Intermediate prices jumped about 7%, yesterday, to around $112.10 a barrel. Altogether, oil prices are up about 50% since the year began, adding to inflationary pressure on corporations and consumers. Most recently President Biden, who is traveling to Europe for a summit with North Atlantic Treaty Organization (NATO) leaders this week, warned corporate CEOs that Russia may be launching cyberattacks against the United States.
Further weighing on the markets, Federal Reserve Chairman Jerome Powell reinforced the lead bank’s stance on interest-rate hikes. Specifically, Mr. Powell indicated that overnight lending rates would continue to rise until inflation is tamed, adding that increases of more than 25 basis points were a possibility. He also conceded that the pressures created by the pandemic (namely, supply-chain disruptions) were widely underestimated, and are likely to persist.
On top of all this, a new wave of COVID-19 cases is sweeping across Europe, fueled by the subvariant BA.2, which reportedly spreads faster than Omicron, but is less lethal. Meanwhile, the outbreak in China is at its worst since the peak of the pandemic. This also adds a further layer of risk to already strained supply chains, particularly as that nation manufactures a large portion of the world’s goods.
Trading was volatile on Monday, with the Dow Jones Industrial Average dropping 201 points, or 0.6%. This marked its first close in the red out of the last six sessions. The S&P 500 closed just a couple of points below the unchanged mark, while the NASDAQ composite shed 55 points, or 0.4%. Performance among the major market sectors was evenly split. Energy shares led the day, rising 3.8% on the threat of there being less Russian oil moving around. Meanwhile, materials stocks advanced 0.9%. On the other side of the coin, consumer discretionary issues fell 0.8%, while communication services were down 0.7%.
As for today’s session, stocks in Asia were mostly up overnight, and the major indexes in Europe are all in the green. Meanwhile, U.S. stock futures are suggesting the indexes will have a positive open, and crude oil prices are up slightly.
Later in the week, we get the figures for February’s new home sales on Wednesday, with the seasonally adjusted annual rate expected to tick up to around 820,000 units (from 801,000 the month before). Thursday brings initial and continuing jobless claims, along with durable and core capital goods orders. Then, on Friday, we get the pending home sales index for February, where consensus is calling for a flat reading, compared to a 5.7% decline the month before.
– Mario Ferro
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
