Russia’s War Drags on, Taking U.S. Markets with it (March 11 Market Recap)
March 11 Market Recap – Russia’s War Drags on, Taking U.S. Markets with it.
- Dow 32,944 or (670) or (1.99%)
- Nasdaq 12,843 or (470) or (3.5%)
- S&P 4,204 (124) or (2.86%)
- USD10Y 2.004% +28bp or +16.2%
Russia’s War of Aggression
As we enter the third week of the war there is seemingly no end in sight. The war has and will continue to dominate the market narrative and fundamentals will not matter until a meaningful and lasting ceasefire has been achieved.
Economic Data, Inflation and The Fed
While jobless claims missed expectations, it was a small miss and the JOLTS report accurately demonstrated just how tight the labor market really is with 11.3 million open positions and 4.3 million people quitting their jobs last month. The major report of the week was Core CPI which showed a 6.4% rise year over year and a 0.5% increase month over month. While the February number was a slight decrease from January’s, the data this week will do nothing to change the Fed’s announcement this coming Wednesday of a ¼ point hike in the Fed Funds rate. In fact, we could immediately see chatter and bets being placed in the market that the next meeting will see a ½ point hike depending largely on CPI data and the war.
Infections and hospitalizations fell by nearly half and deaths fell by nearly one third as the Omicron surge continues to wane. However, another variant of Omicron, BA.2 is surging in Denmark, England, and especially in China. While BA.2 is even more infectious than original Omicron, BA.1, and indeed, infections in these countries are spiking, it does not appear that BA.2 causes higher percentages of hospitalizations and deaths.
All eyes on the Federal Reserve and their announcement on Wednesday of what is widely expected to be a ¼ point rate hike. Perhaps more widely anticipated will be Fed Chair Powell’s comments on inflation, the Fed’s balance sheet and whether the Fed will take a more aggressive posture in reducing their holdings other than just passively allowing current bonds to mature and roll off the balance sheet without replacing them.
Market Data Points Next Week
- Monday – N/A.
- Tuesday – February PPI, March Empire State Manufacturing.
- Wednesday – February Retail Sales. Federal Reserve Open Market Committee Statement.
- Thursday – Initial Jobless Claims, March Philadelphia Fed Manufacturing Survey.
- Friday – February Existing Home Sales, February Index of Leading Economic Indicators.
March 11 Market Recap Trading…
Monday – Dow (797) to 32,817, Nasdaq (482) to 12,830, S&P (127) to 4,201, USD10Y +2.7bp to 1.751%
- Fears of a global embargo against Russian energy supplies pushed Brent crude to a multi-year $130/bbl high before it settled in to close at $121/bbl. Even without the embargo, Russian oil is being shunned with JP Morgan reporting that 66% of Russian oil is struggling to find buyers.
- Nine of eleven S&P sectors traded in the red today led lower by Consumer Discretionary, Communication Services, and Technology. Energy and Utilities were up 1.57% and 1.31% respectively.
- The most recent talks between Russia and the Ukraine broke down as Russia demanded a Russian appointed prime minister of Ukraine, permanently ceding the Crimea and the Donbas regions to Russia and amending the Ukrainian constitution to prohibit it from joining any bloc.
Tuesday – Dow (184) to 32,632 Nasdaq (35) to 12,795, S&P (30) to 4,170, USD10Y +12.1bp to 1.872%
- Markets whipsawed violently today, trading down some 200 points in the first ninety minutes before rallying nearly 800 points from the bottom only to lose all momentum and finish near the lows of the day.
- Nine of the eleven S&P sectors traded down today led lower by Consumer Staples, Healthcare, and Utilities. Consumer Discretionary was relatively flat. Only Energy was positive in any meaningful way, +1.39%.
- The Biden administration announced a ban on all Russian energy imports and the EU declared a reduction of 2/3rds of Russian natural gas imports.
- Suspending business in Russia: a who’s who of iconic consumer brands announced the suspension of all business activities inside of Russia today. Starbucks (SBUX), Coca-Cola (KO), Pepsi (PEP) and McDonalds (MCD) joined Netflix (NFLX), Levi’s (LEVI), Burberry (BURBY), Ikea (private) and Unilever (UL) all of which had previously announced suspension of business activities inside of Russia.
Wednesday – Dow +653 to 33,286, Nasdaq +459 to 13,255, S&P +107 to 4,277, USD10Y +7.6bp to 1.948%.
- All three indices rallied hard in a broad-based advance after it was rumored that OPEC will increase crude production. Crude fell 12%.
- January Job Openings and Labor Survey showed 11.3 million open positions. 4.3 million people quit their jobs last month.
- Nine of eleven S&P sectors traded higher today led by Tech, Financials, and Communication Services. Utilities and Energy were down 0.78% and 3.18% respectively.
Thursday – Dow (112) to 33,174, Nasdaq (125) to 13,129, S&P (18) to 4,259, USD10Y +6.3bp to 2.011%.
- Six of the eleven S&P sectors down today led lower by Tech, Consumer Staples, and Financials.
- Jobless claims missed expectations at 227,000 claims vs expected 217,000 claims and last week’s slightly revised higher print of 216,000 claims.
- February Core CPI came in at +6.4% year over year and +0.5% month over month, a slight downtick from last month’s +0.6% number.
- Corporate News: Amazon (AMZN) jumped 5.4% on last night’s news that their board had approved their 20-1 stock split and a $10 billion stock buyback program. Goldman Sachs (GS) fell 1.11% as they became the first major investment bank to shutter their Russian operations. CrowdStrike (CRWD) rallied 12.5% as they beat earnings and raised their forecast. Electric truck maker Rivian (RIVN) sunk 12% post close as they missed top and bottom-line estimates. Oracle (ORCL) delivered a mixed quarter; the stock is off 50bp post-close. DocuSign (DOCU) plunged 16% after beating expectations, announcing a $200 million stock buyback but reducing fiscal year guidance. JPMorgan Chase (JPM) announced they are winding down their business operations in Russia.
Friday – Dow (229) to 32,944, Nasdaq (286) to 12,843, S&P (55) to 4,204, USD10Y (0.7) bp to 2.004%.
- Markets traded down to end a fifth street negative week as Russia’s war against the Ukraine stretched into its third week.
- All eleven S&P sectors traded negative today led lower by Communication Services, Tech, and Consumer Discretionary.
- President Biden called for the removal of normal trade relations with Russia and announced a ban on imports of Russian seafood, vodka, and diamonds.
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