Month: March 2022

The Markets (as of market close March 11, 2022)

Each of the benchmark indexes listed here closed lower for the second straight week. The war in Ukraine continued, with Ukraine’s top diplomat indicating he saw no progress in talks with Russia. Inflation continued to run hot ahead of this week’s Federal Reserve meeting. During the week, markets oscillated between panic selling and dip-buying. And the volatility wasn’t restricted to stocks — crude oil prices and bond yields also swung higher and lower. By the end of the week, the Nasdaq, the S&P 500, and the Dow fell the furthest. Crude oil prices dipped about $5.00 per barrel. Gold prices rose nearly 1.0%. The dollar inched higher, while 10-year Treasury yields added 28 basis points.

Wall Street opened last week lower. Each of the benchmark indexes listed here fell by at least 2.0%, with the Nasdaq (-3.6%) and the S&P 500 (-3.0%) dropping the most. The Russell 2000 lost 2.5%, the Dow slipped 2.4%, and the Global Dow slid 2.1%. Ten-year Treasury yields rose nearly 3 basis points to 1.75%. The dollar was mixed. Gold prices continued to climb, closing the day up 1.7% to $2,004.30 per ounce. Crude oil prices rose to $121.41 per barrel. The national average price for regular gasoline topped $4.00 a gallon for the first time in over a decade and only $0.11 lower than the record high on July 17, 2008. Rising gasoline prices at the pump are a reflection of the pressure that the Russia-Ukraine crisis has put on the global oil markets.

Other than the Russell 2000 (0.60%), the benchmark indexes listed here closed lower last Tuesday as investors weighed the impact of the U.S. ban on imports of Russian oil and energy. The S&P 500 dipped 0.7%, while the Dow fell 0.6%. The Nasdaq and the Global Dow lost 0.3%. Ten-year Treasury yields rose 12 basis points to 1.87%. The dollar slid lower, while crude oil prices advanced to $124.87 per barrel. Gold prices jumped 3.1% to $2,058.20 per ounce. Not surprisingly, energy was the only sector to gain ground, as consumer staples and health care dropped more than 2.0%. While about 8.0% of U.S. total petroleum imports come from Russia, European countries rely more heavily on Russian crude oil and natural gas for energy. The embargo on Russian energy and crude oil raises several issues, including finding alternative sources to replace the Russian supply, the impact of the embargo on global trade flows, supply chain disruptions, and inflation.

Last Wednesday, in a turn of events, stock prices surged to their biggest rally since June 2020, while European shares advanced the most since March 2020. Crude oil prices dropped nearly 11.0% to $110.32 per barrel, while 10-year Treasury yields added more than 7 basis points to close at 1.94%. The dollar and gold prices declined. The latest rally may be temporary, driven by dip buyers and bargain hunters.

Wall Street dipped lower last Thursday as investors reacted to inflation reaching a 40-year high and a lack of progress in talks between Russia and Ukraine as the war raged on. Each of the benchmark indexes listed here finished in the red, with the Nasdaq falling 1.0%. The S&P 500 lost 0.4%, followed by the Dow (-0.3%), the Russell 2000 (-0.2%), and the Global Dow (-0.2%). Ten-year Treasury prices slid, driving yields up 6 basis points to 2.01%. The dollar and gold prices rose, while crude oil prices decreased 2.3% to $106.21 per barrel. Despite the drop in crude oil prices, the energy sector advanced more than 3.0%.

Stocks continued to slide last Friday as Russia expanded its attack on Ukraine. President Joe Biden called for removal of normal trade relations with Russia, likely the precursor for new tariffs on Russian imports. A drop in tech shares pulled the Nasdaq down 2.2%. The small caps of the Russell 2000 fell 1.6%. The large caps of the S&P 500 (-1.3%) and the Dow (-0.7%) closed in the red. The Global Dow declined 0.4%. Crude oil prices rose over 3.0% to $109.40 per barrel. Ten-year Treasury yields dipped minimally, while the dollar advanced for a second consecutive day.

Stock Market Indexes

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

• Inflationary pressures continued to advance in February. The Consumer Price Index rose 0.8% last month after increasing 0.6% in January. A 6.6% increase in gasoline prices accounted for nearly a third of the overall CPI February advance. Of note, food rose 1.0% in February, while food at home prices jumped 1.4% — both were the largest monthly increases since April 2020. The CPI has increased 7.9% since February 2021, the largest 12-month advance since the period ended January 1982. Since February 2021, the CPI less food and energy rose 6.4%, the largest 12-month change since the period ended August 1982. The energy index has risen 25.6% over the last year, and the food index increased 7.9%, the largest 12-month increase since the period ended July 1981.
• The report on international trade in goods and services, out March 8, was for January and revealed that the trade deficit rose 9.4%, or $7.7 billion, to $89.7 billion. Exports fell 1.7% to $224.4 billion, which was more than offset by a 1.2% increase in imports ($314.1 billion). Year over year, the goods and services deficit increased $24.6 billion, or 37.7%, from January 2021. Exports increased $29.9 billion, or 15.4%. Imports increased $54.4 billion, or 21.0%.
• According to the latest report from the United States Treasury, the government deficit for February was $216.6 billion, well above the January surplus of $118.7 billion. In February, government expenditures rose 46.0% to $506.5 billion. Government receipts fell 38.0% to $289.9 billion. Through the first five months of the fiscal year, the total deficit was $475.6 billion, significantly lower than the $1,046.7 trillion deficit over the same period in the previous fiscal year.
• There were 11.3 million job openings in January, little changed from the previous month’s total, according to the latest information from the Bureau of Labor Statistics. Job openings declined in several industries, with the largest decreases in accommodation and food services (-288,000); transportation, warehousing, and utilities (-132,000); and federal government (-60,000). Job openings increased in other services (+136,000) and in durable goods manufacturing (+85,000). Hires and total separations were little changed at 6.5 million and 6.1 million, respectively. Within separations, the number of voluntary quits in January decreased by 151,000 to 4.3 million. The number of layoffs and discharges increased by 129,000 to 1.4 million. Over the 12 months ended January 2022, hires totaled 76.4 million and separations totaled 70.0 million, yielding a net employment gain of 6.4 million.
• The national average retail price for regular gasoline was $4.102 per gallon on March 4, $0.494 per gallon more than the prior week’s price and $1.331 higher than a year ago. As of March 7, the East Coast price increased $0.81 to $4.97 per gallon; the Gulf Coast price rose $0.83 to $4.70 per gallon; the Midwest price increased $0.68 to $4.65 per gallon; the West Coast price increased $0.68 to $5.39 per gallon; and the Rocky Mountain price increased $0.57 to $4.54 per gallon. As of March 7, residential heating oil prices averaged $4.92 per gallon, more than $0.87 per gallon above the prior week’s price and almost $2.04 per gallon higher than last year’s price at this time. Residential propane prices averaged nearly $3.00 per gallon, up $0.11 per gallon above last week’s price and $0.58 per gallon above last year’s price. U.S. crude oil refinery inputs averaged 15.4 million barrels per day during the week ended March 4, which was 21,000 barrels per day less than the previous week’s average. Refineries operated at 89.3% of their operable capacity last week. Gasoline production increased last week, averaging 9.6 million barrels per day. On February 24, Russia’s invasion of Ukraine contributed to a significant increase in the Brent crude oil price, which rose to $134.00 per barrel as of March 8.
• For the week ended March 5, there were 227,000 new claims for unemployment insurance, an increase of 11,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended February 26 was 1.1%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended February 26 was 1,494,000, an increase of 25,000 from the previous week’s level, which was revised down by 7,000. States and territories with the highest insured unemployment rates for the week ended February 19 were Alaska (2.4%), California (2.4%), Illinois (2.4%), New Jersey (2.4%), Rhode Island (2.4%), Minnesota (2.3%), Massachusetts (2.2%), New York (2.2%), Michigan (1.8%), Montana (1.8%), and Pennsylvania (1.8%). The largest increases in initial claims for the week ended February 26 were in Massachusetts (+3,201), Rhode Island (+1,040), the District of Columbia (+995), Nevada (+689), and Kansas (+587), while the largest decreases were in Michigan (-9,161), California (-5,412), Florida (-2,182), Ohio (-2,098), and Illinois (-1,777).

Eye on the Week Ahead

Some extremely important, potentially market-moving economic information is available this week, beginning with the highly anticipated meeting of the Federal Open Market Committee. A few weeks ago, much of the focus was on escalating inflation likely attributable to labor shortages and backlogs caused by rapidly expanding economic growth. The war in Ukraine has impacted not only inflation, but the global economy as well. How the FOMC responds is up to speculation, although Federal Reserve Chair Jerome Powell has indicated that he would probably favor a 25-basis-point increase to the federal funds rate.

The Markets (as of market close March 4, 2022)

Wall Street was hit hard last week as traders moved from stocks to bonds and gold. Each of the benchmark indexes listed here lost value, with the Global Dow dropping more than 4.0% and the Nasdaq declining nearly 3.0%. The Russian escalation of the war in Ukraine eclipsed strong economic data at home, including a solid jobs report. The crisis in Ukraine has boosted commodities, particularly crude oil prices, which rose more than 25.0% last week. Federal Reserve Chairman Jerome Powell said he would support a 25-basis point interest rate increase in March as inflation has continued to soar.

Stocks closed mixed last Monday as investors considered more sanctions against Russia, which responded by putting its nuclear forces on high alert. The large caps of the Dow and the S&P 500 fell 0.5% and 0.2%, respectively, while the Nasdaq (0.4%) and the Russell 2000 (0.4%) added value. The Global Dow dipped 0.6%. Ten-year Treasury yields fell 15 basis points to 1.83%. The dollar inched higher, while domestic crude oil prices jumped nearly 5.0%, reaching $95.91 per barrel. Gold prices also rose, climbing to $1,910.50 per ounce. The Russian central bank raised interest rates to 20.0% as the ruble plunged following additional sanctions imposed by Western countries. The United States, the European Union, the United Kingdom, and Canada pledged to exclude certain large Russian banks from the SWIFT interbank messaging network. Talks between representatives of Russia and Ukraine ended with no deal on a potential cease-fire as the conflict intensified throughout the day.

Domestic crude oil prices vaulted past $105.00 per barrel last Tuesday, sending domestic and global stocks tumbling. Ten-year Treasury yields slid to 1.70%, marking their worst four-day drop since last December. Investors could view surging oil prices, rising inflation, and the intensifying Russia-Ukraine crisis as threats to economic growth. That, coupled with the prospect of higher interest rates, may be moving investors away from stocks. By the close of trading last Tuesday, each of the benchmark indexes listed here declined, with the Global Dow (-2.0%) and the Russell 2000 (-1.9%) falling the furthest, followed by the Dow (-1.8%), the Nasdaq (-1.6%), and the S&P 500 (-1.5%). The dollar and gold prices traded higher. Among the market sectors, financials and materials were hit the hardest, while energy rose 1.0%.

Crude oil prices, Treasury yields, and stocks climbed higher last Wednesday. The Russell 2000 jumped 2.5%, the S&P 500 rose 1.9%, the Dow gained 1.8%, and the Nasdaq added 1.6%. The Global Dow increased 1.0%. Ten-year Treasury yields advanced nearly 16 basis points to 1.87%. Domestic crude oil prices climbed nearly 8.0% to $111.51 per barrel, while the dollar and gold prices retreated. Commodity markets around the globe rose to multi-year highs last Wednesday. In addition to rising oil prices, aluminum jumped to an all-time high and wheat climbed to its highest price since 2008.

Last Thursday, stocks erased most of the gains from the previous day. A decline in tech shares dragged down the equity market, with the Nasdaq falling 1.6% and the Russell 2000 dropping 1.3%. Ten-year Treasury yields slid to 1.84%. The dollar and gold advanced, while crude oil prices retreated to $108.36 per barrel. With prices increasing at the fastest rate since 1982, Federal Reserve Chairman Jerome Powell told the Senate Banking Committee that the central bank should have cut stimulus sooner in an attempt to slow burgeoning inflation.

Despite a strong labor report (see below), stocks continued to slide last Friday. The Russell 2000 and the Global Dow dropped nearly 2.0%, the Nasdaq fell 1.7%, the S&P 500 lost 0.8%, and the Dow slipped 0.5%. Crude oil prices jumped nearly $8.00 to $115.37 per barrel. The dollar and gold prices rose, while 10-year Treasury yields fell 12 basis points to 1.72%.

Stock Market Indexes

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

• Employment rose by 678,000 in February, according to the latest information from the Bureau of Labor Statistics. While new jobs continue to be added on a monthly basis, total employment remains 2.1 million, or 1.4%, below its pre-pandemic level in February 2020. Job growth was widespread, led by gains in leisure and hospitality, professional and business services, health care, and construction. In February, the unemployment rate edged down 0.2 percentage point to 3.8%, and the total number of unemployed dipped by 243,000 to 6.3 million. The labor force participation rate ticked up 0.1 percentage point to 62.3%, and the employment-population ratio rose 0.2 percentage point to 59.9%. The number of those who permanently lost jobs fell marginally to 1.6 million. The number of persons not in the labor force who currently want a job declined by 349,000 to 5.4 million. In February, 13.0% of employed persons teleworked because of the coronavirus pandemic, down from 15.4% in the prior month. In February, 4.2 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic, down from 6.0 million in the previous month. Average hourly earnings in February were $31.58, up $0.01 from January’s figure. Since February 2021, average hourly earnings have increased 5.1%. The average work week rose by 0.1 hour to 34.7 hours in February.
• The international trade in goods deficit widened in January as exports of goods dipped 1.8%, while imports increased 1.7%. The deficit for January was $107.6 billion, up $7.2 billion, or 7.1%, from the December deficit. Exports fell $2.8 billion from December, while imports increased $4.4 billion. Exports of consumer goods slipped $2.7 billion in January, accounting for most of the decrease in overall exports.
• According to the latest PMI™ data from IHS Markit, in February the manufacturing sector registered a stronger improvement in operating conditions amid signs of easing supply-chain disruptions and a sharp expansion in new orders. Stronger new sales growth spurred manufacturers to increase staffing numbers and boost stocks of products. Although input costs increased at the slowest pace in nine months, selling prices rose at the sharpest rate since last November.
• Business activity across the services sector rose sharply in February, according to the latest IHS Markit US Services PMI Business Activity survey. Sales grew at the fastest rate in the last seven months, aided by an increase in foreign client demand. To keep pace, businesses increased their workforce numbers at the fastest pace since May 2021. Inflationary pressures continued to increase, as a marked rise in input costs prompted firms to hike their selling prices at the fastest rate on record.
• The national average retail price for regular gasoline was $3.608 per gallon on February 28, $0.078 per gallon more than the prior week’s price and $0.897 higher than a year ago. The East Coast price increased $0.06 to $3.56 per gallon; the Gulf Coast price rose $0.07 to $3.31 per gallon; the Midwest price increased $0.11 to $3.47 per gallon; the West Coast price increased $0.08 to $4.31 per gallon; and the Rocky Mountain price increased $0.03 to $3.37 per gallon. As of February 28, residential heating oil prices averaged $4.04 per gallon, more than $0.09 per gallon above the prior week’s price and almost $1.19 per gallon higher than last year’s price at this time. Residential propane prices averaged nearly $2.90 per gallon, up $0.05 per gallon above last week’s price and $0.39 per gallon above last year’s price.
• For the week ended February 26, there were 215,000 new claims for unemployment insurance, a decrease of 18,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended February 19 was 1.1%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended February 19 was 1,476,000, an increase of 2,000 from the previous week’s level, which was revised down by 2,000. States and territories with the highest insured unemployment rates for the week ended February 12 were California (2.6%), Alaska (2.6%), New Jersey (2.5%), Rhode Island (2.4%), Massachusetts (2.3%), Minnesota (2.3%), New York (2.2%), Illinois (2.1%), Connecticut (2.0%), Montana (1.9%), and Pennsylvania (1.9%). The largest increases in initial claims for the week ended February 19 were in Michigan (+3,500), Kansas (+724), Utah (+454), Connecticut (+349), and the District of Columbia (+239), while the largest decreases were in Missouri (-6,949), New York (-3,037), Ohio (-2,212), California (-2,182), and Tennessee (-1,959).

Eye on the Week Ahead

The economic impact of the Eastern European conflict will continue to be felt here and globally. Not only are traders paying close attention to the economic outlook resulting from the war, but they must also keep an eye on the upcoming Federal Reserve meeting, particularly in light of the latest developments in Ukraine.