THE WEEK ON WALL STREET
Stocks closed lower for the week as escalating tensions on the Russian-Ukrainian
border added to existing jitters over higher inflation and a pending tightening of
monetary policy. The Dow Jones Industrial Average slid 1.90%, while the Standard
& Poor’s 500 declined 1.58%. The Nasdaq Composite index lost 1.76% for the week.
The MSCI EAFE index, which tracks developed overseas stock markets, fell 1.00%.
GEOPOLITICAL TENSIONS
Markets have been skittish in recent weeks due to persistent, elevated inflation and
the uncertainty over how aggressive the Federal Reserve may be with its monetary
tightening. As tensions escalated between Russia and the West over a possible
Russian invasion of Ukraine, investors moved away from risk assets, such as stocks,
and sought the safety of U.S. Treasury bonds. Stocks were hard hit on Thursday as
reports surfaced that both sides were exchanging artillery fire. The slide continued
on Friday as prospects of a diplomatic offramp appeared to dim. While geopolitical
news dominated trading last week, investors were relieved by the Federal Open
Market Committee meeting minutes (released on Wednesday) that suggested the
Fed may not act any more aggressively than current market expectations.
AN EARLY ECONOMIC SNAPSHOT
Last week three economic reports provided an update on the state of the economy.
The first was the Producer Price Index, which suggested that inflationary pressures
remain acute. Wholesale prices rose 1.0% last month and posted a 12-month rise of
9.7%, the latter of which was near a record high. The consumer showed continued
strength as retail sales rose a better-than-expected 3.8%, though some of that gain
may be due to higher costs. Meanwhile, industrial production gained 1.4%, nearly
triple the consensus expectation. Capacity utilization increased 1.0 percent,
reaching its highest level since March 2019.
THE WEEK AHEAD: KEY ECONOMIC DATA
Tuesday: Purchasing Managers’ Index (PMI) Flash. Consumer Confidence.
Thursday: Gross Domestic Product (GDP). Jobless Claims. New Home Sales
Friday: Consumer Sentiment. Durable Goods Orders.
THE WEEK AHEAD: NOTABLE COMPANIES REPORTING EARNINGS
Tuesday: The Home Depot, Inc. (HD), Palo Alto Networks, Inc. (PANW), Agilent
Technologies, Inc. (A).
Wednesday: Lowe’s Companies, Inc. (LOW), The TJX Companies, Inc. (TJX), eBay,
Inc. (EBAY), Booking Holdings, Inc. (BKNG).
Thursday: Block, Inc. (SQ), Dell Technologies, Inc. (DELL), VMware, Inc. (VMW),
Ingersoll Rand, Inc. (IR), AnheuserBusch InBev (BUD).
Friday: Berkshire Hathaway, Inc. (BRK.B), EOG Resources, Inc. (EOG).
FINAL THOUGHTS:
The big news is the saga taking place with Ukraine and Russia. While effective news
content to create market anxiety, the reality is these types of tensions have not had
big impacts on the markets in the longer term. Take a look below. We highlighted
the 5 most recent armed conflicts that impacted markets broadly. Five out of five
times stocks bottomed at the invasion or just before the invasion. This is counter to
what many think. In fact, many might logically believe that uncertainty from conflict
means “risk off” until the conflict ends. This is not the case. There is always the "this
time is different" commentary, but we haven't seen real data to support that stance.
Volatility is likely with us through the first half of the year. The market is digesting
a lot of information and there's a lot of negative news priced in. Corporate earnings
are good and that is good news. Covid seems to be fading which is more good
news. Don't let the media make you believe the sky is falling or about to fall. It's
not.
Have a great week!
