U.S. stocks began the week with a see-saw session, bouncing between gains and losses several times, but a late afternoon push saw the major market indexes close in the green. Altogether, the Dow Jones Industrial average ended yesterday’s session up 94 points, the S&P 500 Index gained 32 points, and the tech-dominated NASDAQ led the pack, adding 185 points, or 1.3%. From a sector performance standpoint, consumer discretionary issues led the advancers, with a gain of 2.7%. At the other end of the spectrum, energy stocks took the biggest hit, falling 2.6%.
As we approach the start of today’s trading session on our shores, stocks in Asia closed mostly higher overnight, while shares in Europe are up sharply as talks between Ukraine and Russia were set to resume. Meanwhile, futures are indicating a solid open for the major U.S. indexes, while West Texas Intermediate oil has backtracked 4.9%, to a little under $101 a barrel.
It will be a busy week on the economic news front. This morning will bring us the latest reading on the Consumer Confidence Index for March, as well as the Federal Housing Finance Agency’s price index for January. This will be followed by ADP’s National Employment Report for March and the Energy Information Administration’s (EIA) Weekly Petroleum Status Report on Wednesday. Initial and continuing jobless claims will be announced on Thursday, along with the Producer Price Index and the latest figures on consumer spending. The week wraps up with updates on nonfarm payrolls, the unemployment rate, and the Institute for Supply Management’s report on manufacturing activity (among others) on Friday.
The Federal Reserve’s plans to steadily increase interest rates throughout the year will likely keep volatility elevated, as investors begin rebalancing their portfolios in light of tightening monetary policy. All things being equal, stocks generally lose favor with the markets when fixed-income investments become a more compelling holding. Moreover, if the lead bank should begin to make increases of half a percentage point (rather than the quarter-point changes it has stuck to in recent history), it could result in even greater price instability for stocks in the quarters ahead.
The pace of the Federal Reserve’s rate hikes may not necessarily need to be stepped up, however, if oil prices remain high enough to slow down the economy on their own. In particular, Russia’s invasion of Ukraine has sent energy prices soaring this year on supply concerns. While there has been no progress on peace talks between the two nations so far, oil took a step back yesterday after Shanghai announced new restrictions due to a surge in COVID-19 cases. Reflecting the potential for reduced demand from China, both West Texas Intermediate and Brent Crude (the international benchmark) plunged about 7%, to about $106 and $112.50 a barrel, respectively.
– Mario Ferro
At the time of this article’ writing, the author did not have positions in any of the companies mentioned.
