Weekly Market Update 02/20/2022
by Justin J. Long CFP®, on Feb 20, 2022
Happy Sunday! We hope you are enjoying the gorgeous weather this weekend, before most of the Lower 48 sees major drops in temperature. Here in Las Vegas, we are expected to drop 20 degrees between tomorrow's high and Wednesday's, so we hope you all bundle up and stay warm!
In the Long house, we are gearing up for spring sports sign ups (which may or may not be our only chance at watching baseball in the near future, thank you MLB lockout). What plans are you making for the spring?
And now on to the recap of this week:
Week in Review: Tough week as Russia-Ukraine situation dampens sentiment
The S&P 500 fell 1.6% this week, driven primarily by worsening Russia-Ukraine developments. Risk sentiment was further pressured by disappointing growth-stock earnings reactions and lingering concerns about a Fed policy mistake.
The Dow Jones Industrial Average fell 1.9%, the Nasdaq Composite fell 1.8%, and the Russell 2000 fell 1.0%.
Russia-Ukraine headlines were all over the place, but at the end of the week, the possibility of a Russian invasion of Ukraine appeared "imminent," even as Russia's foreign minister accepted an invitation to meet with Secretary of State Blinken next week. That is, if Russia doesn't invade over the three-day weekend.
Investors de-risked and sought shelter in Treasuries, where the 10-yr yield declined three basis points to 1.93% after touching 2.06% midweek. Ten of the 11 S&P 500 sectors ended the week in negative territory.
The energy sector was the weakest performer with a 3.7% decline as oil prices ($91.21, -1.88, -2.0%) briefly fell below $90 per barrel amid reports indicating that a nuclear agreement with Iran was within reach. The consumer staples sector (+1.1%) was the only sector that closed higher.
In the growth-stock space, NVIDIA (NVDA), Shopify (SHOP), Roblox (RBLX), Roku (ROKU), DraftKings (DKNG), Fastly (FSLY), and Redfin (RDFN) suffered steep losses following their earnings reports. The disappointing reactions fueled concerns that valuations were still too high.
Regarding the Fed, St. Louis Fed President Bullard (FOMC voter), New York Fed President Williams (FOMC voter), and Cleveland Fed President Mester (FOMC voter) individually prepared the market for a rate hike in March.
The fed-funds-sensitive 2-yr yield, however, declined five basis points to 1.47%, suggesting the Fed's policy shift has been priced in or that the geopolitical situation could sway the Fed into being less hawkish than feared. The probability for a 50-bps hike in March decreased to 21.1% from 49.2% last week, according to the CME FedWatch Tool.
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As always, it is my pleasure to bring you this weekly update. If this or anything else is causing you pause or you would like further details, please feel free to reach out to me and we can schedule some time to chat.
Justin J. Long CFP®
Diazo Wealth Group
Upcoming Economic Calendar
Source: 1. FactSet
Source: Week in perspective provided by Briefing.com. Briefing.com offers live market analysis on their web site www.Briefing.com.
The data provided is for informational purposes only and is not an endorsement of any security, mutual fund, sector, or index. The information contained here is not guaranteed as to accuracy or completeness. All economic and performance information is historical and does not guarantee future results.
The Dow Jones Industrial Average is a price-weighted index comprising 30 widely traded blue chip U.S. common stocks. The NASDAQ Composite Index is a market-value-weighted index of all common stocks listed on the NASDAQ stock exchange. The S&P 500 Index tracks the performance of 500 of the largest publicly traded companies in the United States. The MSCI Europe, Australasia, and Far East (EAFE) Index tracks the performance of publicly traded large- and mid-cap stocks of companies in those regions. The Cboe Volatility Index (VIX) shows the market’s expectation of 30-day volatility and is constructed using the implied volatilities of a wide range of S&P 500 Index options. Weekly and year-to-date figures for the VIX show percentage changes, not investment returns. The Russell 2000 Index tracks the performance of approximately 2,000 publicly traded small-cap companies in the United States. It is not possible to invest directly in an index.
The Treasury yield curve is derived from available U.S. Treasury securities trading in the market and is provided directly by the U.S. Federal Reserve. The spread measures the difference in yield between two government securities. A normal (positive) yield curve occurs when longer-term rates are higher than shorter-term rates. The opposite holds true for an inverted yield curve. Year-to-date changes in U.S. Treasury bond yields are shown in basis points (bps). One hundred basis points equals one percent.
Oil prices are represented by West Texas Intermediate (WTI) crude oil.
The G20 countries comprise a mix of the world’s largest advanced and emerging economies, representing about two-thirds of the world’s population, 85% of global gross domestic product, and over 75% of global trade.
Innovative Adviser Solutions, LLC, a registered investment adviser, dba Diazo Wealth