Hello, I’m Greg Curvall, Senior Portfolio Manager with Fifth Third Bank.
Last week, U.S. stocks finished mostly positive during an extremely volatile week, driven mostly by Russia’s invasion of Ukraine. The yield on the U.S. 10-year Treasury finished the week at 1.96 percent and the dollar continued to rise against major peers. Oil surged to over $100 a barrel, before retreating to $92 to end the week.
Russia’s invasion of Ukraine was the top headline. The government in Ukraine announced a nationwide state of emergency and called on all capable citizens to defend the country. This comes after leaders around the world, including President Biden, imposed sanctions on Russia meant to punish Russian financial institutions, Putin’s inner circle and the overall Russian economy. Germany also halted certification of the Nord Stream 2 pipeline, a natural gas pipeline project that was designed to double the flow of Russian gas to Germany.
Like energy prices, the conflict in Ukraine will probably drive up the prices of other commodities as well. More than a quarter of the world's wheat exports come from Ukraine and Russia. Experts warn prices may surge as much as 60 percent if the conflict extends to harvest season in July.
There are also human costs. Along with the many casualties of war, the violence has forced an exodus of some 370,000 people to neighboring European countries. Governments estimate the war could lead to as many as 5 million refugees.
Stock market bulls are quick to highlight one economic silver lining of the invasion. The action in Ukraine decreased the probability of a 50 bps rate hike in March from the Federal Reserve, which provided a lot of support for equity prices last week.
Other good news, the rolling over of daily COVID-19 cases has allowed a number of countries and companies to begin easing mask mandates. New daily cases are down 90 percent from mid-January as large cities in the U.S. have made plans to ease mask restrictions.
In the week ahead, there are a lot of moving pieces to attract the attention of investors. On top of the ever-changing crisis in Ukraine, we have a couple of important meetings this week along with a host of economic data releases. On Tuesday, we get a handful of PMI and ISM figures and, later that evening, President Joe Biden will deliver his State of the Union speech. Additionally, Federal Reserve Chair Powell with testify to Congress on monetary policy on Wednesday. On Thursday, we get Factory Orders and Durable Goods Orders. Then we will finish the week on Friday with our most anticipated report, the February Employment Report. Economists expect 400 thousand jobs added last month, and the unemployment rate to slip to 3.9 percent.
As always, we will be watching and reporting back to you next week. Thank you.