Weekly Market Update 02/13/2022

This week large-cap indices struggled, as risk sentiment was pressured by increased rate-hike expectations and fears of a Russian invasion of Ukraine. The S&P 500 fell 1.8%, the Nasdaq Composite fell 2.2%, and Dow Jones Industrial Average fell 1.0%. The Russell 2000, however, rose 1.4%

Eight of the 11 S&P 500 sectors closed lower, led by the communication services (-3.9%), information technology (-2.9%), real estate (-2.8%), and consumer discretionary (-2.3%) sectors. The materials (+1.1%) and energy (+1.8%) sectors ended the week with decent gains. 

The real action started midweek when more U.S. states announced plans to relax mask mandates amid improving COVID-19 trends and an observation from Dr. Fauci that the U.S. is heading out of the "full blown" pandemic phase. That catalyzed a broad-based advance, which was upended on Thursday following the Consumer Price Index (CPI) report for January. 

Briefly, total CPI increased 0.6% month-over-month in January (Briefing.com consensus 0.5%), and so did core CPI (Briefing.com consensus 0.5%), which excludes food and energy. On a year-over-year basis, they were running at their highest levels since 1982 at 7.5% and 6.0%, respectively.

After the report, St. Louis Fed President Bullard (FOMC voter) told Bloomberg that he supports the Fed hike rates by 100 basis points by July 1, including one hike being 50 basis points. The market, which had brushed off the negative reaction to the CPI report, rolled over following these comments. 

Early in the week the CME FedWatch Tool assigned the probability of a 50-basis-point hike in March to 93.8% on Thursday. More noteworthy, the 2-yr yield spiked 22 basis points to 1.56% in one day -- its largest increase since the financial crisis.

Stocks weakened further on Friday after National Security Advisor Jake Sullivan acknowledged there was a "distinct possibility" that Russia could invade Ukraine before the end of the Olympics. Oil prices rose modestly while Treasury yields fell. 

Rate-hike fears were somewhat tempered, though, after a Bloomberg report suggested that the Fed is unlikely to issue an emergency hike in between policy meetings and that a 50-basis-point hike is not a given. By weeks end the probability for a half-point hike in March decreased to 50.2%, according to the CME FedWatch Tool.

At week's end, the 2-yr yield was up 20 basis points at 1.52%, and the 10-yr yield was up three basis points to 1.96%. The U.S. Dollar Index rose 0.6% to 96.03. 

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®
Founder/Lead Advisor
Diazo Wealth Group
702-745-1800 Direct
702-278-6560 Cell

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Source: 1. FactSet

Source: Week in perspective provided by Briefing.com. Briefing.com offers live market analysis on their web site www.Briefing.com.

Source: https://www.schwab.com/resource-center/insights/content/schwab-market-update 

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.

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