Russia’s Ukraine threat, worries on Fed rate hikes could make for a turbulent week in markets
Traders at work on the floor, NYSE. Feb 16, 2022.
Another turbulent week awaits the stock market as investors continue to monitor developments in Ukraine and adjust portfolios for the Federal Reserve’s rate rises.
Stocks have been rocked both ways in the week that passed, due to the Dow Jones Industrial AverageIt is worth checking out worst day of the year Thursday. These three averages were all down Friday afternoon. They are now on pace to lose more than 1% for the week. Tech, energy, and consumer discretionary were amongst the most volatile sectors in trading Friday.
Some Fed speakers have been added to the schedule for the week, including Loretta Mester, President of the Cleveland Fed and Christopher Waller, Governor of the Fed. Reports from retailers continue to show that earnings are continuing to rise. Macy’s Home Depot. A number of economic reports are available, including data on durable goods and consumer spending, as well as inflation data.
“Maybe it is the greatest issue [for the market]”Next week is technical,” explained Jim Paulsen of The Leuthold Group, chief investment strategist.
The markets continued to react to developments around Russia’s threats to invade Ukraine and the buildup of its troops at Ukraine’s border.
What’s Russia’s end game? It could just go on forever … When you look ahead, the thing that’s going to change this is if they go in or there’s a total pullout, and what’s going to bring a pullout any time soon,” Paulsen said.
His statement said that stocks appeared to be poised for a higher breakout before Russia’s threat to Ukraine began to weigh on them. About two weeks ago, the S&P 500 tried to retake 4,600 after touching a low of 4,222 on Jan. 24.
It was still doing it despite inflation and Fed material. Market was okay with that. Russia brought everything down. Paulsen said that we now find ourselves in a position where, if we fall low enough often enough, it is necessary to do so.
This Friday Russia prepared to carry out more drills near Ukraine’s borderWhile the U.S. continued its efforts to find a diplomatic solution, this was not allowed.
Paulsen stated, “As an investment, it leaves you hanging there. And technically, you have to wonder whether we’re going to go down to test that low.” The next 60 days are unknown, however the six months ahead should prove to be optimistic.
Chart analysis does not always predict the direction of the market. However, investors tend to focus their attention on the key technical levels because many investors are influenced by them. When fundamentals are uncertain, they can also be used as a guide.
The charts are fascinating
Scott Redler is chief strategy officer of T3Live.com and closely monitors the technical indicators. He sees a good chance that the S&P 500 revisits that January low in a retest.
“Inflation is the narrative this year, with the Fed taking out accommodation. Redler suggested that there may be a reaction from the Fed to the Russia/Ukraine situation. Even if Russia’s threat is gone, Redler said volatility will still be present as the Fed increases interest rates in March.
“That doesn’t solve the problem with four to seven rates hikes thisyear and the run off of the balance sheet,” said he, noting that in the past the market has responded negatively Fed tightening. “In 2018, the S&P fell 20% and the Nasdaq fell 24%. So why wouldn’t the S&P test the 4,222 area?”
Redler and other technical analysts are watching a bearish pattern on the chart of the S&P 500 that would suggest the index could form a “head-and-shoulders” pattern, which could bring even more volatility.
Redler said, “It’s distribution patterns. This is what market’s been doing for the past month. It builds the right shoulder.” According to Redler, the neckline in the chart will be between 4,220 and 4,280. If the neckline is broken, prices will drop after it forms. He said that the broad market index might fall to 3.900 in this case.
Redler will also be watching charts for Big Tech stocks. Apple is not breaking down, it hasn’t been acting like an island. If Apple starts to break the 166-ish area, it would help to bring the S&P down faster,” he said. Apple has been trying to keep the $165-$170 range, which is somewhat constructive.
Microsoft shares also seem to be holding steady. “Apple and Microsoft are such a high percentage of the S&P and the Dow. “In order for bears to truly growl they will need to separate these names from the high growth ones,” he stated.
Fly to safety
Investors are weighing Federal Reserve rate rises against fears of Russian invasion of Ukraine. Friday’s 10 year Treasury yield was at 1.92 percent. Yields are linked to price. The 10-year has been viewed as an investment vehicle that protects investors from possible developments in Ukraine on weekends.
The market had been anxious one week prior about whether the Fed would act. more aggressive with interest rate hikesThis was in addition to a potential 50-basis-point increase in March. However, futures markets began to lose faith in the possibility of a half-point rate rise as the week went on. On Friday, the market priced in just a quarter point increase.
James Bullard, President of the St. Louis Fed had raised hopes for an even higher rate. reiterated that view MondayCNBC’s CNBC News “Squawk Box.” The minutes of the Fed’s previous meeting were then taken. released Wednesday. These members were not as hawkish as expected and there was no sign that they favoured a larger rate increase.
According to Ben Jeffery (rates strategist, BMO Capital Markets), “I believe based upon what we heard in the minutes, and everyone but Bullard, it seems that no one really supports a 50-basis points hike.”
In terms of economic data for the next week, there will be a couple of important reports: durable goods Friday; and consumer sentiment Friday.
Also, Friday’s personal consumption expenditure data will be released. The Federal Reserve closely monitors the report’s inflation reading, so investors will pay attention to it.
We kind of know from experience that it’s likely to be ahead of our expectations. John Briggs from NatWest Markets said, “It’s probably going to be the highlight of this week as far as data goes.”
Oil prices have risen due to concerns about U.S. retaliatory sanction that could restrict Russian oil access on the markets. West Texas Intermediate futures climbed above $95 per barrel in the last week for the first-time in seven year. The price dropped to around $91 by Friday.
Reports that the stock market was reacting to more on Friday prompted more action by investors. the U.S. and Iran appeared close to a deal Friday to revive a nuclear agreement. Iran will be allowed to export its crude oil to international markets if the deal is restored.
There is a lot positive feedback about it. The market seems to have reached a conclusion. It is an easy marriage. Barrels are needed by the market. John Kilduff of Again Capital, a partner, said that the Iranians and Biden need barrels.
Kilduff indicated that oil company earnings reports will be closely watched by traders over the week. Occidental Petroleum. EOG Resources, NRG, Chesapeake Energy Coterra EnergyResults will be posted as well.
Kilduff explained that investors will be watching the U.S. drill rig count increase to determine if there are any opportunities for growth. companies report plans to increase drilling.
He said, “What their capex plans are going to be?”
Week ahead calendar
President’s Day Holiday
11:15 a.m. Fed Governor Michelle Bowman
Earnings: Home Depot, Macy’s,Toll Brothers Caesars Entertainment, Public Storage, Agilent, Palo Alto Networks, Mosaic, Virgin Galactic, Texas Roadhouse. TrueCar. Anglogold Ashanti. KBR. Sealy. Cracker Barrel, Krispy Kreme,Fluor International, Expeditors International Medtronic,Norsk Hydro and HSBC
9:00 a.m. S&P/Case-Shiller home prices
10:00 a.m. FHFA Home Prices
9:45 am Manufacturing PMI
9:00 a.m. PMI Services
10:00 am. Confidence of consumers
Atlanta Fed President Raphael Bostic
Earnings: Booking Holdings, Barclays, eBay, Bausch Health, Brink’s, Travel + Leisure, Dana, Molson Coors Brewing, Sleep Number, IMAX, Tupperware, TJX Cos, Allbirds, Bath & Body Works, Petrobras, Lowe’s, Iamgold, Hertz Global, Extra Space Storage, Sturm Roger, Chesapeake, Coterra
Earnings: Anheuser-Busch, Alibaba, Daimler, AXA, Moderna,WPP, Iron Mountain and Gannett, SeaWorld and Coinbase Etsy, Morningstar, Dell Technologies, Beyond Meat, Ambac Financial, Cushman & Wakefield, Allscripts Healthcare, Keurig Dr. Pepper, NetEase, NRG Energy,Planet Fitness VMWareSouthwestern Energy. Steve Madden. Wayfair. American Tower. Discovery, Occidental Petroleum
8:30 a.m. 8:30 a.m.
8:15 a.m. Q4 real GDP 2nd reading
10:00 a.m. New home sales
11:00 a.m. Atlanta Fed’s Bostic
12:00 p.m. Cleveland Fed President Loretta Mester
9:00 p.m. Fed Governor Christopher Waller
8:30 a.m. Durable goods
8:30 a.m. 8.30 a.m.
8:30 a.m. PCE deflator
10:00 a.m. Pending home sales
10:00 a.m. Consumer sentiment
Earnings: Berkshire Hathaway