Author: admin

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.

The stock market was once again dominated by the situation in Russia. On Thursday, Russia invaded Ukraine, causing the market to open sharply lower. At one point, the Dow Jones Industrial Average and S&P 500 were both down more than 2 percent.

Later in the day, the market made a stunning reversal. After being down 859 points, the Dow finished the day with a gain of 92.07 points. The S&P 500 made a similar comeback. After trading down more than 2.6 percent, it finished the day with a 1.5 percent gain. And the NASDAQ closed the session 3.3 percent higher after being down 3.5 percent earlier in the day.

During the day, investors appeared to go bargain hunting, buying tech stocks during the dip. Stocks like Netflix, Amazon, Microsoft, and Alphabet were down sharply during the day but finished higher. Microsoft finished up 5.1 percent, Netflix gained 6.1 percent, and Alphabet closed up 4 percent.

On Friday the markets continued to rally, with the S&P 500 gaining 2.24 percent, Dow Jones Industrial Average 2.52 percent and the NASDAQ 1.64 percent. For the week, the S&P 500 returned 1.20 percent, Dow Jones Industrial Average 0.24 percent and the NASDAQ 2.01 percent.

Even though the markets staged an amazing comeback, the S&P 500 remains in a correction, more than 10 percent off its record close in early January. The NASDAQ started Thursday in a bear market at more than 20 percent below its record high in November. After Thursday’s reversal, the NASDAQ is still down 16 percent from its all-time highs.

Russia’s invasion of Ukraine caused oil prices to spike over $100 per barrel for the first time since 2014. Surging oil prices could cause inflation to continue or even increase, which may cause the Federal Reserve to raise rates even more aggressively. Or, it could cause the Fed to completely rethink its tightening policy if the markets and the economy start showing weakness.

Gold is usually considered a safe haven during geopolitical problems. On Thursday, gold jumped 3 percent, hitting a one-year high at $1,970 per ounce. Like gold, bonds are also considered a safe haven, saw prices climb and yields fall. Investors did not consider Bitcoin a safe haven on Thursday, as it fell 7 percent to around $35,100.

Economic news for the week included the weekly jobless report, which was reported lower than expected. Initial filings for unemployment insurance claims came in at 232,000 for the week ending February 19. This figure was 3,000 less than the estimated figure and down 17,000 from the previous week.

Continuing claims totaled 1.48 million, a drop of 112,000 from the previous week and the lowest figure since March 1970. The total number of those getting unemployment benefits dropped 30,000 to 2.03 million. Even though these figures show improvement, total employment numbers are still 1.7 million below what they were in February 2020. The unemployment rate has fallen from a pandemic peak of 14.7 percent to the current rate of 4 percent.

Also released was the core personal consumption expenditures price index, which showed a 5.2 percent increase from a year ago, the highest level since 1983. Including energy and food, the personal consumption expenditure price index came in at 6.1 percent, showing that prices are rising at their fastest level in almost 39 years.

Consumer spending increased faster than expected, rising 2.1 percent for the month versus the estimated 1.6 percent increase. Also reported was the better-than-expected news that orders for long-lasting goods rose 1.6 percent in January, compared to the estimate of a 0.8 percent gain.

The economy continued to grow and do well with a slightly higher revision of the GDP. Initially, it was reported at 6.9 percent, and the revision put the GDP at 7.1 percent. This brings the full-year growth to 5.7 percent, which is the fastest growth rate since 1984. The annualized rate during the fourth quarter came in at 7 percent.

The housing market saw new home sales fall 4.5 percent to a seasonally adjusted annual rate of 801,000 in January. The sale of new single-family homes fell more than expected last month, mainly due to rising mortgage rates and the continuation of high prices that are continuing to keep many first-time buyers away from the housing market.

In January, home sales dropped 19.3 percent on a year-to-year basis. Sales peaked at a rate of 993,000 units back in January 2021, which was the highest level seen since the end of 2006. The week ended with the average rate for a 30-year fixed-rate mortgage at 4.36 percent. The average for a 15-year fixed mortgage is 3.52 percent.

The median price for a new home in January rose 13.4 percent from a year ago to $423,300. There are 406,000 new homes on the market, up from 394,000 units last December.