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By Nicholas
Jasinski | Wednesday, March 2 Review
and Preview didn’t go out last night because of a publishing error. Apologies
for the delay. Here’s last night’s edition. In the meantime, stock index
futures were pointing to modest gains at Wednesday's open. Oil prices
continued to rise, with WTI crude above $110 a barrel. War Angst. Stocks slid Tuesday and
crude oil prices again topped $100 a barrel as the war in Ukraine raged on
and Western allies added more sanctions on Russian individuals and
institutions. Faced with all the resulting near-term uncertainty, the path of
least resistance for stocks of late has been lower. The Dow Jones Industrial Average
closed down 1.8% Tuesday, the S&P 500 lost 1.5%, and the Nasdaq
Composite fell 1.6%. Energy stocks were the only winning group in
the S&P 500, as the West Texas Intermediate price
of a barrel of crude oil jumped 8%, to $103.41 a barrel. Brent,
the international benchmark, added 7.1%, to $104.97 a barrel. It is the first
time that both have been above $100 since 2014. The International
Energy Agency, which includes the U.S. and 30 other nations,
pledged to release 60 million barrels of stockpiled oil. That's about 60% of
the oil that the world consumes in just one day. It's unlikely to make much
of a dent. The Organization of the Petroleum Exporting
Countries and its allies meet Wednesday, but all recent signs
are that they're unlikely to increase production faster than their current
trajectory. Oil and gas prices will remain elevated
until there's less concern from traders about potential disruptions to supply
from Russia. All else equal, that could mean higher headline inflation
figures in the U.S. and abroad. WTI is up a whopping 73% from a year ago. Nonetheless, the geopolitical tremors of
late have taken a half-point interest rate increase by the Federal
Reserve in March off the table, as far as the market is
concerned. Futures pricing now implies a roughly 2% chance of a 0.5
percentage point hike this month. That likelihood had been more than 90%
following the release of January inflation data just a few weeks ago. A quarter-point increase is the consensus
once again. Fed Chairman Jerome Powell will speak to
lawmakers Wednesday and Thursday. Investors and economists will be eager to
hear his take on the economic ramifications of the Russia-Ukraine conflict
and resulting sanctions. The lower rate expectations dragged on bond
yields Tuesday, with the 10-year Treasury yield
declining 0.13 percentage point, to 1.71% today. Shorter-term yields fell
less, hurting banks' bread-and-butter business model of borrowing short to lend
long. Add to that the worries that sanctions on
Russian banks—including cutting several off from the Swift global payments
messaging system—could mean that foreign banks might not get paid in full or
on time, and investors sold out of bank stocks Tuesday. The SPDR
S&P Bank exchange-traded fund dropped 5%. Last night's main event was President Joe
Biden's State of the Union address before Congress. Barron's
Sabrina Escobar covered the speech and
briefed investors on the key points here. |
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DJIA: -1.76% to 33,294.95 The Hot Stock: Target +9.8% Best Sector: Energy +1.0% |
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