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Week in Review: Russia-Ukraine

Week in Review: Last week was tough, as Russia-Ukraine situation dampened sentiment.

The S&P 500 fell 1.6% last week, driven primarily by worsening Russia-Ukraine developments. Risk sentiment was further pressured by disappointing growth-stock earnings reactions and lingering concerns about a Fed policy mistake.

The Dow Jones Industrial Average fell 1.9%, the Nasdaq Composite fell 1.8%, and the Russell 2000 fell 1.0%.

Russia-Ukraine headlines were all over the place, but at the end of the week, the possibility of a Russian invasion of Ukraine appeared “imminent,” even as Russia’s foreign minister accepted an invitation to meet with Secretary of State Blinken next week. That is, if Russia doesn’t invade over the three-day weekend.

Investors de-risked and sought shelter in Treasuries, where the 10-yr yield declined three basis points to 1.93% after touching 2.06% midweek. Ten of the 11 S&P 500 sectors ended the week in negative territory.

The energy sector was the weakest performer with a 3.7% decline as oil prices ($91.21, -1.88, -2.0%) briefly fell below $90 per barrel amid reports indicating that a nuclear agreement with Iran was within reach. The consumer staples sector (+1.1%) was the only sector that closed higher.

In the growth-stock space, NVIDIA (NVDA), Shopify (SHOP), Roblox (RBLX), Roku (ROKU), DraftKings (DKNG), Fastly (FSLY), and Redfin (RDFN) suffered steep losses following their earnings reports. The disappointing reactions fueled concerns that valuations were still too high.

Regarding the Fed, St. Louis Fed President Bullard (FOMC voter), New York Fed President Williams (FOMC voter), and Cleveland Fed President Mester (FOMC voter) individually prepared the market for a rate hike in March.

The fed-funds-sensitive 2-yr yield, however, declined five basis points to 1.47%, suggesting the Fed’s policy shift has been priced in or that the geopolitical situation could sway the Fed into being less hawkish than feared. The probability for a 50-bps hike in March decreased to 21.1% from 49.2% last week, according to the CME FedWatch Tool.

 

Source: Briefing Investor

Mike Minter

Mike develops investment portfolio allocations, handles trading and rebalancing, and conducts research and analysis as a Portfolio Manager and Financial Advisor for the firm. As a perpetual student of investing and the markets, Mike considers himself obsessed with the subject. Mike has earned the CERTIFIED FINANCIAL PLANNER™ (CFP®) and Certified Fund Specialist® designations. He is also an active member of the Houston chapter of the Financial Planning Association (FPA).   Read Mike’s Profile HereRead More Articles by Mike

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