Market Perspective for March 6, 2022

The week of February 28 was another volatile one for the markets as the Russian invasion of Ukraine entered its second week. The situation in Ukraine has caused the markets to be jittery with no real direction. On Thursday night, it was reported that the Russian army had attacked a nuclear power plant in Ukraine, causing the markets to open lower once again on Friday.

The markets were volatile during the week as traders tried to assess the geopolitical and economic news each day. On Tuesday, the Dow Jones Industrial Average dropped 597 points, and the next day, the Dow jumped 596 points.

The DJIA finished off 1.3 percent for the week and is now down 7.5 percent year-to-date. The broader S&P 500 also finished lower by 1.3 percent and is down 9.5 percent for the year. The NASDAQ market closed lower for the week by 2.8 percent and is now down 14.9 percent this year.

The Chicago Board of Options Exchange volatility index, or the VIX, rose 16 percent to 31.98. In early February, before Russia invaded Ukraine, the VIX closed at just below 20. The higher the VIX, the more unsure and volatile the market is.

The war in Ukraine is not only affecting stocks but also commodity prices, especially oil. West Texas Intermediate blew past $110 last week, climbing to as high as $116 and settling at $115. This is the highest level oil has reached since 2011.

On Friday, the jobs report came in much better than expected with non-farm payrolls increasing by 678,000, with Wall Street expecting an increase of 440,000 jobs.

Wages were lower than expected, coming in at an increase of just 0.03 percent or 1 cent per hour, compared to an estimated gain of 0.5 percent. This could be an indication that inflation is slowing. The unemployment rate dropped to 3.8 percent, the lowest level since the pandemic began.

European stocks had their worst week since March 2020. The STOXX Europe 600 lost 7 percent for the week, losing 3.6 percent Friday. Banks on the exchange lost 6.7 percent on Friday. In other European markets on Friday, the DAX closed down 4.4 percent, the FTSE lost 3.48 percent, and the CAC closed down almost 5 percent.

Federal Reserve Chairman Jerome Powell spoke on Wednesday and said that they are leaning toward a quarter-point rate increase for March. His main concern is that inflation has increased at its fastest pace since the early 1980s. Powell’s testimony before Congress eased concerns that there would be a 50 basis point increase. But he also added that it was too early to say if the Russian invasion of Ukraine would change the Fed’s policy.

His statements caused an increase in Treasury yields, with the 2-year yield jumping 14 basis points to 1.48 percent. The 10-year yield increased 11 basis points to 1.84 percent but closed the week up 0.2 percent at 1.74 percent. The 10-year U.S. Treasury bond started the week at 1.92 percent. As bonds rallied, yields dropped to as low as 1.68 percent on Tuesday.

Mortgage rates were also up and down for the week. The average 30-year mortgage rate climbed to 4.40 percent on Friday, a sharp increase from its level of 4.25 percent on Thursday. The average for a fixed 15-year mortgage ended Friday at 3.49 percent after hitting a recent high point of 3.56 percent.

Sanctions against Russia continue to take a toll on the ruble, dropping to USD 0.01, which is an all-time low. On Friday, S&P Dow Jones Indices said it is removing all stocks listed or domiciled in Russia from its benchmarks. This is effective before the markets open on Wednesday and will also affect Russian American depository receipts or ADRs.

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