(Justin Vaughn, Editor, Options Trading Report)
The market had plenty of reasons to fret. Russia showed no sign of wanting to end its war on Ukraine and appeared ready to escalate attacks, not halt them. In response, the U.S. said it would remove “Most favored nation” trading status from the country and blocked Russian oil imports. Big U.S. corporations, including Goldman Sachs Group, McDonald’s, and JPMorgan Chase continued to flee, joining the many already to have done so. As the starving of Russia’s economy continues and more sanctions are imposed, the hope is that these pressures will dislodge the tyrant’s intentions.
Stocks logged another weekly decline as the war puts investors on edge. Technology stocks continued their declines Friday, dragging all the major indices to weekly losses, as volatility reigned and inflation fears heightened. All three indexes finished the week in the red, after Friday’s selloff. The Dow Jones Industrials closed down 2% for the period, its fifth- consecutive weekly loss. The S&P 500 and Nasdaq Composite lost 2.9% and 3.5% respectively, for the week, capping the fourth weekly loss in the past five weeks for both indexes. Of the three major indexes, the technology-heavy Nasdaq Composite is down the most this year, falling 18% through Friday’s close. Big swings are now common-place for major indexes, but even by current standards this week’s jumps and falls were extreme, some investors and traders said. Meanwhile, the yield on the benchmark 10-year Treasury note fell to 2.004% Friday, from 2.008% Thursday. Yields climb when bond prices fall.
‘Shock’ From Unprecedented Economic War…The Kremlin said on Thursday that Russia’s economy was experiencing a shock and that measures were being taken to soften the impact of what it described as an “absolutely unprecedented” economic war as being waged against Moscow. The West has imposed sweeping sanctions against Russia over dictator Putin’s invasion of Ukraine. “Our economy is experiencing a shock impact now and there are negative consequences, they will be minimized,” Kremlin spokesman Dimitry Peskov told reporters on a conference call. He described the situation as turbulent but said measures to calm and stabilize it (economy) were already being taken. “This is absolutely unprecedented. The economic war that has started against our country has never taken place before. So it is very hard to forecast anything,” Peskov said. Russia better ‘brace’ for more sanctions as discussions are now taking place with Germany to shut down the massive oil transmission pipeline and, the natural gas pipeline. Putin’s war has brought death and destruction, and he must be stopped.
Biden just signed the widely awaited executive order to study digital currencies, a move the industry welcomed and skeptics ‘decried.’ The order, titled “Ensuring Responsible Development of Digital Assets,” directed agencies across the federal government to produce reports on digital currencies and consider new regulations. This could be the first step in the direction of regulation of crypto and lays out a long-awaited national policy for digital assets across many priorities such as consumer protection, financial stability, illicit finance, and leadership in global finance. The order will direct the U.S. Treasury with the CBDC (Central Bank Digital Currency) to lead the report. Lee Reiners, executive director of Duke University School of Law’s Global Financial Markets Center, said it appears likely to delay (referring to Biden’s executive order to study digital currencies) any consequential policy decisions until after the midterm elections in November. “Leading up to this executive order, the narrative that had been circulating was that the administration was set to crack down on crypto,” he said. “This executive order is a complete 180 from that,” he said. “This is as close to an embrace of crypto as you could have hoped for from this Biden Administration if you’re pro-crypto.” Cryptocurrencies have exploded in growth; tipping $3 trillion in market cap last November, up from $14 billion just five years ago, but recent volatility in the sector has ‘shaved’ that figure to $2 trillion. Surveys suggest that around 16% of American people have invested or traded, or used cryptocurrencies.
RUMBLINGS ON THE STREET
Olaf Scholz, Chancellor of Germany, IBD “With the invasion of Ukraine, we are in a new era,” he said. “Putin created a new reality with his invasion of Ukraine. This new reality requires a clear response. We have given it.”
Gary Peters, co-investment chief officer for fixed income at PGIM, Prudential’s asset-management arm, which was overseeing $957 billion in assets as of years end, Barron’s “Regardless of the risks of a strong economy and a faltering stock market, the inflation surge leaves the Fed no choice but to proceed with the first of a series of interest-rate hikes,” Mr. Peters said. “Anybody who thinks the Fed will cling to its playbook from the past few economic cycles is ‘delusional,’ he said. “Inflation is the top problem, not just Wall Street but also on Main Street, and especially Washington.
Paul Zemsky, a chief investment officer of multi-asset strategies at Voya Investment Management and co-manager of $140 million Voya Global Multi-Asset (VYGLX). IBD “Clearly February was not a great month for financial markets or risky assets around the world,” he said. “Pretty much every stock market around the world is down,” he added. Zemsky pointed to inflation reports that were worse or higher than expected, “which raised concerns that the Fed would have to tighten more quickly,” he said. “Additional tightenings were priced in by the market at one point,” he added.
Elon Musk, CEO, Tesla, in a tweet, Barron’s “Hate to say it, but we need to increase oil & gas output immediately. Extraordinary times demand extraordinary measures.”
THE NUMBERS – Barron’s
50 – Container ships waiting for berths at the ports of Long Beach and Los Angeles, more than half the high in January.
200K – Average volume of Russian crude oil in barrels per day imported into the U.S. in 2021.
847 – Number of outlets McDonald’s closed in Russia. The company will pay 62,000 workers at a cost of $50 million a month.
11.3M – Number of U.S. job openings in January, near the 11.4 million record from the month before.