The Profit Margin: March 7, 2022
Statistic of the Week
Inflation in the euro zone hit 5.8% in the month of February, the fourth consecutive record reading. Energy prices were a notable driver – up 31.7% year over year. The EU typically receives 30-40% of its natural gas supply from Russia.
While there was some activity on Friday, the Russian equity markets remain essentially closed. Equity values of Russian companies trading in the US fell severely and are trading at near worthless in London. The Russian finance ministry used $10 billion of reserves to prop up shares of companies within Russia.
Market Moving Events
Monday: Consumer Credit Tuesday: NFIB Small Business Index Thursday: Jobless Claims, CPI, Federal Budget Deficit Friday: Consumer Sentiment
Global equity markets remained under pressure last week as the Russian invasion of Ukraine mercilessly continued. In the US, all three major equity indices fell on the week. The Nasdaq faired the worst, retreating -2.78%.1 The DJIA fell -1.30%,2 while the most diversified of the group, the S&P 500, held up the best, dropping -1.27%.3 The weakness in equities was countered by a strong rally in the fixed income markets. The yield on the 10-year Treasury fell 0.26% to finish Friday at 1.72%.4 This move in the fixed income markets mirrors recent trading action in precious metals as investors look for and bid up “safe haven” assets. The geopolitical news streaming out of Ukraine and Russia overshadowed much of the economic news last week; however, there were several key items. Payrolls for February were exceptionally strong (chart right), with over 75% of employers hiring in the month.5 In his testimony on Capitol Hill, Federal Reserve Chair Jay Powell foreshadowed that in their next meeting the Fed would be raising interest rates, but only by 0.25%, taking a 0.50% hike off of the table.6 With energy markets feeling the full brunt of the turmoil, and the administration threatening to embargo Russian oil, crude prices are up again.7 This will only underscore the results of this Thursday’s critical CPI reading. Despite all of this, it’s important to take stock of both market history and the current economic landscape. The US economy is on firm footing and historically, equity markets rally after a crisis like the one we are experiencing. – Dan McElwee, CFP, ® MBA
Chart of the Week
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Statistic of the Week:
Investor’s Business Daily, The Economist
Market Moving Events:
Chart of the Week:
Haver, Clearnomics, Bureau of Labor Statistics
Commentary:1.Bloomberg2.Bloomberg3.Bloomberg4.Bloomberg5.Haver / Bureau of Labor Statistics / Barron’s6. Investor’s Business Daily7. Bloomberg.com