Stocks Shed Early Losses Brought on After Russian Attack…..
U.S. equities were able to claw back from early solid losses to finish in the green following global condemnation from around the globe of Russia’s invasion of Ukraine. With the first tranche of sanctions announced earlier this week, Russia’s attack brought further actions, with President Biden placing more sanctions on the nation following his address in afternoon action. Meanwhile, stocks in Asia and Europe dropped as the markets assessed the implications on already surging inflation and what the repercussions could be on global monetary policies and economic growth. Treasuries pared an early flight-to-safety to finish mixed, and gold reversed to the downside to erase an initial rally, while the U.S. dollar remained solidly higher. Crude oil prices also moderated after an initial spike in the wake of Russia’s action, with the global benchmark of Brent crude prices briefly breaching the $100 per barrel mark for the first time since 2014. The economic and earnings fronts took a back seat to the news of the Russian attack, though jobless claims moderated slightly more than expected and Q4 GDP growth was revised higher, while new home sales declined. In earnings news, eBay topped earnings estimates but offered softer-than-expected guidance, and Booking Holdings bested earnings forecasts but is margin outlook disappointed.
The Dow Jones Industrial Average rose 92 points (0.3%) to 33,224, the S&P 500 Index gained 63 points (1.5%) to 4,289, and the Nasdaq Composite rallied 436 points (3.3%) to 13,474. In very heavy volume, 6.6 billion shares of NYSE-listed stocks were traded, and 6.1 billion shares changed hands on the Nasdaq. WTI crude oil moved $0.71 higher to $92.81 per barrel. Elsewhere, the gold spot price fell $10.90 to $1,899.50 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—jumped 0.9% at 97.04.
The global equity markets plunged from the start in the wake of the overnight attack on Ukraine by Russia, including airstrikes on its capital of Kyiv, with Russian President Putin saying it is a “military operation” aimed at demilitarizing Ukraine and not to occupy the country. However, those losses vanished, as the markets reversed course to finish higher. The Russian attack was condemned by a host of global leaders, including President Biden, who addressed the nation, saying that the U.S. will impose additional sanctions against Russia, as well as place added troops in Germany as NATO looks to bolster its defenses in Europe. The U.S. and European Union, along with other allies, had levied a first tranche of sanctions on Russia after it sent troops earlier this week into some eastern Ukraine regions. Commodity prices, including energy, wheat, palladium, platinum, aluminum, and nickel, initially rallied in reaction to the turn of events to exacerbate inflation concerns, but those gains evaporated come the closing bell. An early flight-to-safety tempered, with Treasury prices coming down to mitigate some of the pressure on yields, and gold reversed to the downside, but the U.S. dollar gained solid ground.
Initial jobless claims came in at a level of 232,000 for the week ended February 19, versus the Bloomberg estimate calling for 235,000, and down from the prior week’s upwardly-revised 249,000 level. The four-week moving average fell by 7,250 to 236,250, and continuing claims for the week ended February 12 dropped by 112,000 to 1,476,000, versus estimates of 1,580,000. The four-week moving average of continuing claims declined by 49,000 to 1,576,000.
The second look (of three) at Q4 Gross Domestic Product the broadest measure of economic output, showed a quarter-over-quarter (q/q) annualized rate of expansion of 7.0%, revised from the first release’s 6.9% figure and matching estimates. Q3’s figure was unadjusted at a 2.3% increase. Personal consumption was revised to a 3.1% increase, versus expectations of an upward revision to a 3.4% rise from the initially-reported 3.3% pace of growth. Q3 consumption was unadjusted at a 2.0% gain.
On inflation, the GDP Price Index was revised to a 7.1% rise, versus estimates of an unadjusted 6.9% increase, while the core PCE Index, which excludes food and energy, was adjusted higher to a 5.0% gain, versus expectations to be unrevised at a 4.9% rise.
New home sales declined 4.5% month-over-month (m/m) in January to an annual rate of 801,000 units, just shy of forecasts calling for a rate of 802,000 units, and below December’s upwardly-revised 839,000-unit level. The median home price rose 13.4% y/y to $423,300. New home inventory rose to 6.1 months from December’s level of a 5.6-months supply at the current sales pace. Sales were lower m/m in the Northeast, Midwest and South, but up in the West. Also, sales in all regions were lower y/y, except for the West which gained ground. New home sales are based on contract signings, offering a timelier read on housing activity compared to the larger contributor of existing home sales,which are based on closings.
The February Kansas City Fed Manufacturing Activity Index further into a level depicting expansion (a reading above zero) than expected. The index rose to 29 from January’s unrevised 24 reading, compared to forecasts calling for a slight increase to 25.0.
The week’s economic calendar will close out in robust fashion, beginning with personal income and spending for January, with the former forecasted to have fallen 0.3% m/m and that the latter to have increased 1.6%, followed by a preliminary read on durable goods orders, with the headline figure expected to have gained 1.0% m/m, while orders ex-transportation are anticipated to have advanced 0.4% m/m, and nondefense goods ex-aircraft are expected to post a 0.3% m/m increase. After the opening bell, pending home sales will be released, with economists calling for a 0.5% m/m decline, and the final University of Michigan Consumer Sentiment Index will close out the day, projected to remain at the preliminary reading of 61.7, but well below January’s 67.2 level.
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