Following reports of mounting civilian fatalities in Ukraine, Western powers, including the U.S., indicated that they were preparing to provide additional support to the beleaguered nation, as well as to impose further sanctions against Russia. National security advisor Jake Sullivan said he expected Russian forces to step up their efforts in the south and eastern portion of Ukraine.
Meanwhile, with 2-year Treasuries yielding more than their 10-year counterparts, we have what is commonly referred to as an inverted yield curve. Frequently, this relatively rare event has signaled that a recession lies ahead, but often with considerable lag. (Out of the seven inversions that have occurred since 1978, six have been followed by a recession.) Elsewhere, while many are breathing a sigh of relief that COVID-19 appears relatively under control, a new Omicron subvariant (dubbed XE) has emerged that apparently spreads more quickly than any previous incarnation of the virus.
Yesterday, however, traders appeared to be looking past these ongoing concerns, at least temporarily. U.S. stocks began the week on an up note, with the major indexes climbing steadily throughout the day. Altogether, the Dow Jones Industrial average ended yesterday’s session up 103 points, or just under one third of a percent, while the S&P 500 Index gained 36 points (.8%), and the tech-dominated NASDAQ led the pack, adding 271 points, or 1.9%. The latter got a big boost when news surfaced that Tesla (TSLA) CEO Elon Musk had purchased a 9% stake in Twitter (TWTR), becoming its largest shareholder. That sent shares of the social media platform soaring 27%. Tesla shares also benefited, rising 5.6% for the day. From a sector performance standpoint, decliners outnumbered advancers. Consumer discretionary and communication services stocks led the pack, each rising about 2.3%, while technology issues also put in a strong showing, increasing 1.9%. Utilities and healthcare stocks showed the biggest declines, each shedding about three quarters of a percent. Meanwhile, West Texas Intermediate crude oil jumped 4.4% on increased concerns over Russia’s invasion of Ukraine.
As we near the start of today’s trading session on our shores, futures are indicating that the major U.S. indexes will open modestly to the downside. Elsewhere, stocks in Asia closed higher overnight, while shares in Europe are slightly in the red. West Texas Intermediate oil has gained a further 1.2%, to over $104 a barrel.
It’s a relatively light week on the economic news front. This morning will bring us the Institute for Supply Management’s report on activity within the U.S. services sector. This will be followed the release of the Federal Open Market Committee’s (FOMC) minutes from the last meeting on Wednesday. Thursday we’ll see the latest figures for initial and continuing jobless claims. Additionally, several Federal Reserve officials will be giving talks throughout the week on such varied topics as inflation inequality, the economy, health, and full employment. Traders will likely parse the comments for any hints on how fast and how much the lead bank will be raising rates in the quarters ahead. Chairman Jerome Powell has previously indicated that the Fed is open to making increases of half a percentage point if necessary. (In recent years the Fed has limited itself to quarter-point changes.)
– Mario Ferro
At the time of this article’ writing, the author did not have positions in any of the companies mentioned.
