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Oil Down, Stocks Up: New Trading Week Looks Hopeful
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Monday, March 14, 2022
Pre-market indexes are turning sharply higher roughly a half hour before the opening bell, especially on the Dow, which is trying to break a five-week losing streak and has jumped 50 points in just the last five minutes to +230 points. The Nasdaq, which was trading in negative territory just moments ago, is now +15 points and the S&P 500 is +25. The Nasdaq and the S&P have traded lower in four of the last five weeks.
It’s a very big week for market-moving events, highlighted mid-week by the Federal Open Market Committee’s (FOMC) first meeting since late January, at which it is widely expected the Fed will hike interest rates for the first time since December 2018. Because inflation has stormed the economy so completely — including a +7.9% Consumer Price Index just reported last week — earlier expectations had been for a half-point (50 basis-point) hike.
Fed Chair Jay Powell himself put a damper on that notion a couple weeks ago: largely due to a whole new host of unknowns with Russia’s invasion of Ukraine and the subsequent fallout which likely means recession coming to Europe and perhaps here in the U.S. at some point, Powell directed expectations toward a 25 basis-point hike. We’ll see how much push-back Powell gets on this, if not in Wednesday’s monetary policy statement then in the FOMC minutes, which will be made public in a few weeks.
Part of the idea to move slower might be to proceed cautiously in order to not spur an inversion of the yield curve between 2-year and 10-year bonds. But the way things look this morning, that may be in the cards regardless. The 10-year, which has at last broached 2% for the first time since the mid-summer 2019, is at 2.08% while the 2-year is 1.82% and fast approaching. An inversion of the yield curve often — though not every time — indicates a recession on the horizon.
But the reason for positive sentiment this morning seems to be not only the anticipation of Powell and the FOMC removing the question mark hanging over interest rates for weeks or months now, but because oil prices continue to drift down ward: -5.5% last week, with the WTI and Brent crude down another -4% and -3.5%, respectively this morning. Diplomatic talks to end the Russia-Ukraine war also continue today, offering a hopeful sign the end to the tragedy and devastation may be at hand at some point in the foreseeable future.
Also, following two months down in the markets, March is so far is performing no better: the Nasdaq is -6.6% month to date, the S&P is -3.9% and the Dow is -2.8%. These are bargain-shopping prices, and even with Q1 earnings season expectations cooling from previous quarters, the best companies in the best industries are still expected to perform well. And their shares have been on sale, too. Advance Micro Devices (AMD - Free Report) and Target (TGT - Free Report) are both Zacks Rank #1 (Strong Buy) stocks currently, and they are down -30% and -10%, respectively, year to date.
Image: Shutterstock
Oil Down, Stocks Up: New Trading Week Looks Hopeful
Monday, March 14, 2022
Pre-market indexes are turning sharply higher roughly a half hour before the opening bell, especially on the Dow, which is trying to break a five-week losing streak and has jumped 50 points in just the last five minutes to +230 points. The Nasdaq, which was trading in negative territory just moments ago, is now +15 points and the S&P 500 is +25. The Nasdaq and the S&P have traded lower in four of the last five weeks.
It’s a very big week for market-moving events, highlighted mid-week by the Federal Open Market Committee’s (FOMC) first meeting since late January, at which it is widely expected the Fed will hike interest rates for the first time since December 2018. Because inflation has stormed the economy so completely — including a +7.9% Consumer Price Index just reported last week — earlier expectations had been for a half-point (50 basis-point) hike.
Fed Chair Jay Powell himself put a damper on that notion a couple weeks ago: largely due to a whole new host of unknowns with Russia’s invasion of Ukraine and the subsequent fallout which likely means recession coming to Europe and perhaps here in the U.S. at some point, Powell directed expectations toward a 25 basis-point hike. We’ll see how much push-back Powell gets on this, if not in Wednesday’s monetary policy statement then in the FOMC minutes, which will be made public in a few weeks.
Part of the idea to move slower might be to proceed cautiously in order to not spur an inversion of the yield curve between 2-year and 10-year bonds. But the way things look this morning, that may be in the cards regardless. The 10-year, which has at last broached 2% for the first time since the mid-summer 2019, is at 2.08% while the 2-year is 1.82% and fast approaching. An inversion of the yield curve often — though not every time — indicates a recession on the horizon.
But the reason for positive sentiment this morning seems to be not only the anticipation of Powell and the FOMC removing the question mark hanging over interest rates for weeks or months now, but because oil prices continue to drift down ward: -5.5% last week, with the WTI and Brent crude down another -4% and -3.5%, respectively this morning. Diplomatic talks to end the Russia-Ukraine war also continue today, offering a hopeful sign the end to the tragedy and devastation may be at hand at some point in the foreseeable future.
Also, following two months down in the markets, March is so far is performing no better: the Nasdaq is -6.6% month to date, the S&P is -3.9% and the Dow is -2.8%. These are bargain-shopping prices, and even with Q1 earnings season expectations cooling from previous quarters, the best companies in the best industries are still expected to perform well. And their shares have been on sale, too. Advance Micro Devices (AMD - Free Report) and Target (TGT - Free Report) are both Zacks Rank #1 (Strong Buy) stocks currently, and they are down -30% and -10%, respectively, year to date.
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