Stocks Fall as Russia Intensifies Ukraine Invasion…..
U.S. stocks dropped sharply, ending the day near session lows to begin March, as volatility was driven by reports that Russia is intensifying its invasion with a 40-mile-long Russian convoy headed in the direction of Ukraine’s capital Kyiv. Russia’s action comes as the U.S. and other countries around the world imposed increased sanctions on Russia including some financial institutions be restricted from using the SWIFT global payment system and many of the country’s assets worldwide being frozen. In addition to all the geopolitical tension, markets awaited President Biden’s State of the Union Address tonight as well as tomorrow’s start of Fed Chairman Jerome Powell’s two-day Congressional testimony. The economic calendar showed that manufacturing activity increased in February, and construction spending jumped for the month of January. In equity news, Target and Workday both rose after beating earnings expectations. Crude oil prices surged to multi-year highs as the events unfolding out of Russia and Ukraine have prompted fears of a potential supply shortage. Treasuries jumped, putting heavy downside pressure on yields across the curve, as investors sought safe options. Gold and the U.S. dollar rallied. Europe fell broadly amid the fears of a greater Russian assault, though Asia finished mostly higher.
The Dow Jones Industrial Average tumbled 598 points (1.8%) to 33,295, the S&P 500 Index fell 68 points (1.6%) to 4,306, and the Nasdaq Composite dropped 219 points (1.6%) to 13,532. In heavy volume, 5.8 billion shares of NYSE-listed stocks were traded, and 6.0 billion shares changed hands on the Nasdaq. WTI crude oil surged $7.69 to $103.41 per barrel. Elsewhere, the gold spot price advanced $45.80 to $1,946.50 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—jumped 0.7% at 97.40.
The final February Markit U.S. Manufacturing PMI Index was downwardly-revised to 57.3, just below the Bloomberg consensus estimate calling for an unrevised 57.5 level. The index was above January’s reading of 55.5. A reading above 50 denotes expansion. Markit said new orders saw a sharper uptick midway through the first quarter, supported by strong demand from new and existing customers. In addition, foreign client demand also strengthened as new export orders rose at the fastest pace in five months.
The January Institute for Supply Management (ISM) Manufacturing Index showed manufacturing growth (a reading above 50) continued to show expansion, increasing to 58.6 from January’s 57.6 level, and versus the Bloomberg consensus estimate of an increase to 58.0. The report came as growth in new orders, production, inventories, and supplier deliveries all accelerated, while employment declined. Prices paid cooled a bit, decreasing 0.5 points to 75.6.
Construction spending rose 1.3% month-over-month (m/m) in January, versus projections of a 0.1% gain and accelerating from December’s upwardly-revised 0.8% gain. Residential and non-residential spending both increased 1.3%.
Tomorrow’s U.S. economic calendar will remain busy, beginning with the release of mortgage applications for the week ended February 25, which will be followed by ADP’s Employment Change report for last month, expected to show 375,000 jobs were added to private sector payrolls, following January’s disappointing 301,000 drop. The Fed will likely garner the most attention, with Chairman Jerome Powell beginning his two-day Congressional semi-annual testimony before the House Financial Services Committee in the morning. Powell’s testimony will be followed by the afternoon release of the Fed’s Beige Book—an anecdotal read on the nation’s business activity used by policymakers to prepare for their next monetary policy meeting which is set to conclude with a highly-anticipated decision to begin its rate hike campaign.
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