Hello, I’m Greg Curvall, Senior Portfolio Manager at Fifth Third Bank.
All three major U.S. equity benchmarks finished lower last week, after the Biden administration imposed more trade sanctions on Russia designed to economically isolate Moscow for its invasion of Ukraine. Technology stocks were hit especially hard as bond yields spiked higher. The yield on the US 10-year Treasury rose 28 basis points to finish the week at 2 percent. This was the largest weekly gain in 30 months.
On top of higher interest rates, market bears argue that the recent spike in oil prices could also push us closer to recession. WTI crude rose to close to $130 a barrel during last week’s trading but finished the week at $109.
Russia continues to pressure Ukraine with bombardments, now into the third week of the invasion, but a glimmer of hope came on Friday as reports indicated Vladimir Putin said there were positive shifts in talks with Ukraine. Meanwhile, the U.S. officially initiated sanctions against Russian energy exports and continued piling on bans on imports like vodka, diamonds, and caviar.
Economic data continues to show prices moving higher. Last week, the Consumer Price Index, a popular measure of inflation, rose 7.9 percent in February, the biggest monthly increase in over forty years. The increase in prices have been broad-based, increasing the costs for energy, food and housing.
The economic calendar is a bit on the light side this week. On Tuesday we get a host of PPI inflation data. On Wednesday we get Retail Sales and the FOMC rate decision. The Federal Reserve will hold its first policy meeting since the conflict began next week, with economists widely expecting a 25 basis point rate hike, amid mounting fears that the central bank may push the economy into a recession as it combats inflation. If the 25-basis point hike is confirmed, it will be the first rate hike since the end of 2018. Powell noted that the rate hikes will be thought through carefully and the war in Ukraine will be taken into consideration. Then we finish up the week with a few housing data releases with Housing Starts and Building Permits on Thursday and Existing Home Sales on Friday.
As always, we will be reporting back to you next week. Thank you.