US market: Indices ended lower for 2nd week as geopolitical tension escalates
Wall Street ended lower on Monday as geopolitical tensions between Russia and Ukraine intensified. Market participants were also concerned regarding the Fed’s stance about interest rate hike in March. All three major stock indexes ended in negative territory.
U.S. stocks markets closed sharply higher on Tuesday following the de-escalation of the geopolitical crisis between Russia and Ukraine. Wall Street has seen a broad-based rally after three consecutive days of losing. All three major stock indexes ended in positive territory.
Wall Street closed mixed after a choppy trading session on Wednesday. Investors were assessing the developments on the geopolitical crisis between Russia and Ukraine. Market participants were also digesting minutes of Fed’s January FOMC.
Wall Street tumbled on Thursday on concerns regarding the geopolitical conflicts. Market participants remained highly uncertain about the global economic impact of this lingering dispute. All three major stock indexes ended in the negative zone.
Stocks extended declines on Friday to close a second straight week in negative territory with geopolitical tensions intensifying to contribute to a further risk-off tone in markets. Over the week, Dow Jones, S&P 500 and Nasdaq were down by more than 1.5%.
Weekly market stats with IND
Let’s see the major developments during the week:
The large-cap indexes suffered their second consecutive week of declines as worries over a Russian invasion of Ukraine and high inflation weighed on sentiment. Dow Jones closed at its lowest level since Sept and Nasdaq to its lowest level since Jan. A steep decline in Meta Platforms (Facebook) weighed heavily on the communication services sector. The typically defensive consumer staples sector outperformed within the S&P 500 Index, helped by gains in Walmart and Procter & Gamble.
The Fed minutes for the January meeting:
Last Wednesday, the Fed released the minutes from the January FOMC meeting, which provided some relief to markets, as they contained no material surprises or overly hawkish commentary. The minutes indicated that while the Fed was generally ready to raise rates in March, it did not particularly favor a 0.50% rate hike or any other overly aggressive move. However, the committee noted that a substantial reduction in the Fed balance sheet seemed appropriate.
Retail sales for January:
On Wednesday, U.S. retail sales for the month of January came in well above expectations, with the headline figure up 3.8% month-over-month, above forecasts of 1.9%, and sharply above last month's reading of -2.5%. The gains were driven by notable increases in non store retail (online sales), furniture sales, and a rebound in auto sales, which were up the most in 10 months.
Quarterly Earnings reports:
It was one of the busiest weeks of the Q4 earnings reporting season. These included several mega-cap names like Walmart, Shopify, Nvidia, Cisco etc. Companies like DoorDash, Cisco, Walmart reported better than expected earnings while Nvidia, Shopify stocks dragged on lower guidance.
Market implications of Russia - Ukraine conflict:
Historically, markets have tended to look past geopolitical tensions, focusing primarily on any potential economic spillovers. Russia is one of the world's largest oil producers, and is particularly important to the European region (supplying nearly 40% of natural gas to the region). As a result, we have seen oil prices remain elevated through this crisis.
In addition to driving oil prices higher, the Russia-Ukraine tensions may drive market volatility and a flight-to-safety response in markets in the near term. This includes investors flocking to traditional safe-haven assets like U.S. Treasury bonds, the U.S. dollar and gold. Read our analysis to know more.