The holiday-shortened week began with stocks lower amid the fluid events unfolding in Ukraine. Following the announcement from Russian President Vladimir Putin that he would immediately recognize the independence of two separatist regions of eastern Ukraine, Russian forces moved into the two regions, in what some global leaders have termed the beginning of an invasion. In response, President Biden cut off resources to the two Ukrainian regions and announced further sanctions on Russia, while Germany halted the certification of the Nord Stream 2 pipeline. News on the economic front was mixed, as preliminary reads on manufacturing and services sector activity came in better than expected, consumer confidence dipped, home prices rose more than forecasts, and the Richmond Manufacturing Index surprised to the downside. Some retailers began to put the finishing touches on earnings season, as Dow member Home Depot and Macy’s posted upbeat results. Treasuries were mixed, with the yield curve flattening, and the U.S. dollar was little changed, while gold gained modest ground, and crude oil prices increased following the news out of Ukraine. Markets in Europe were mixed in a choppy session amid the increased tensions in the region, while markets in Asia were lower.
The Dow Jones Industrial Average declined 483 points (1.4%) to 33,597, the S&P 500 Index shed 44 points (1.0%) to 4,305, and the Nasdaq Composite decreased 167 points (1.2%) to 13,382. In heavy volume, 5.0 billion shares of NYSE-listed stocks were traded, and 4.8 billion shares changed hands on the Nasdaq. WTI crude oil rose $1.70 to $91.91 per barrel. Elsewhere, the gold spot price traded $2.70 higher to $1,902.50 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was unchanged at 96.07.
The preliminary Markit U.S. Manufacturing PMI Index for January rose to 57.5 from January’s unrevised 55.5 figure, and versus the Bloomberg consensus estimate of an increase to 56.0, but the index remained in expansion territory as denoted by a reading above 50. The preliminary Markit U.S. Services PMI Index showed growth (above 50) for the key U.S. sector rose more than expected, jumping to 56.7 from January’s 51.2 figure and compared to forecasts of an increase to 53.0.
The Conference Board’s Consumer Confidence Index fell to 110.5 in February from January’s downwardly-revised 111.1 level, and versus the Bloomberg estimate calling for a reading of 110.0. The overall index was dragged by the Expectations Index of business conditions for the next six months portion of the index, which fell to 87.5 from January’s downwardly-revised 88.8 level, while the Present Situation Index portion of the survey increased to 145.1 from the previous month’s negatively-revised 144.5 level. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—fell to 42.0 from the 43.0 level posted in January.
The Richmond Fed Manufacturing Activity Index remained in expansion territory (a reading above zero) but surprisingly fell to 1 from January’s 8 reading, well below forecasts of 10. New order volume fell into negative territory for the first time in 5 months. Capacity utilization also fell to negative territory, while shipments and order backlogs both did the same.
The 20-city composite S&P CoreLogic Case-Shiller Home Price Index showed an 18.56% year-over-year (y/y) gain in home prices in December, slightly above estimates of an 18.10% rise. Compared to the prior month, home prices were up 1.46% on a seasonally adjusted basis, compared to forecasts of a 1.10% gain.
Treasuries were mixed, as the yield on the 2-year note was up 7 basis points (bps) at 1.53%, the yield on the 10-year note was flat at 1.93%, while the 30-year bond rate was down 1 bp at 2.23%.
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