(Bloomberg) — Stocks slumped, while bonds rallied at end of a week marked by intense volatility amid a standoff between the West and Russia.
Traders also took risk off the table ahead of Monday’s U.S. holiday. Tech, retail and energy shares led losses in the S&P 500, with the $2.2 trillion options expiration Friday exacerbating moves. The Nasdaq Composite tumbled into a “death cross,” a technical pattern that has at times presaged further weakness. Treasury 10-year yields were below 2%, while the dollar rose. Oil was on pace for its first weekly drop in two months, despite worries over supply disruptions should Russia face sanctions.
The U.S. said Russia has massed as many as 190,000 personnel in and around Ukraine, calling it the most-significant military mobilization since World War II. Russia told the U.S. this week it has no plans to attack. Citing escalations in the breakaway Donbas region of Ukraine, Russian President Vladimir Putin called on Kyiv to “sit down at the negotiating table” with separatist leaders “and agree on political, military, economic and humanitarian measures to end the conflict.” The government in Kyiv refuses to negotiate with the Russia-backed separatists.
Federal Reserve Bank of Chicago President Charles Evans said surging inflation calls for a major shift in monetary policy and his New York colleague John Williams backed interest-rate liftoff next month. The current stance of monetary policy is wrong-footed and needs substantial adjustment,” Evans, who’s been a leader among the more dovish officials at the U.S. central bank, said Friday.
Comments:
- “Fear can be a good development for markets,” wrote Callie Cox, U.S. investment analyst at eToro. “When investors get nervous, they tend to add more cash and hedge their positions. The worst market storms typically happen when investors least expect it. Right now, we’re hedged and ready for a big punch to the stomach, but it may not hurt as badly as we think. It’s a good recipe for a relief rally when headlines calm down.”
- “The situation remains fluid and we believe markets will remain subject to bouts of risk-on, risk-off in the coming days,” wrote Win Thin, global head of currency strategy at Brown Brothers Harriman.
- “While there have been some reports of de-escalation in tensions, nothing has changed fundamentally to prevent investors from remaining fearful about a possible Russian invasion,” wrote Fawad Razaqzada, an analyst with ThinkMarkets. “Beyond this, investor sentiment is likely to remain downbeat anyway given concerns about surging inflationary pressures around the world and policy tightening from the Fed.”
U.S. sovereign debt attracted $7.4 billion in inflows, the most since the coronavirus pandemic first struck, according to a Bank of America Corp. note citing EPFR Global data for the week through Wednesday. After their worst start to a year in decades, Treasuries are reasserting their haven status and eclipsing the appeal of riskier assets — a troubling combination for BofA strategists.
Read: ECB Officials Edge Toward 2022 Rate Hike to Stem Inflation
Some corporate highlights:
- General Electric Co. warned that supply-chain snags, a labor shortage and material inflation will be a drag on its businesses at least until the middle of this year.
- DraftKings Inc. added fewer new customers in the fourth quarter than Wall Street had expected even after spending hundreds of millions of dollars to lure new bettors.
- Streaming-video platform Roku Inc.’s revenue and sales outlook fell short of analyst expectations.
- Deere & Co. reported better-than-expected profit and raised its outlook as a booming farm economy helps the agriculture-machinery maker work past supply-chain issues, raw-material inflation and labor unrest.
- Celanese Corp. agreed to buy the majority of DuPont de Nemours Inc.’s mobility and materials arm for $11 billion in cash.
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
- The S&P 500 fell 1% as of 12:39 p.m. New York time
- The Nasdaq 100 fell 1.4%
- The Dow Jones Industrial Average fell 0.8%
- The MSCI World index fell 1%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.4% to $1.1319
- The British pound fell 0.2% to $1.3583
- The Japanese yen was little changed at 115.05 per dollar
Bonds
- The yield on 10-year Treasuries declined five basis points to 1.92%
- Germany’s 10-year yield declined four basis points to 0.19%
- Britain’s 10-year yield declined nine basis points to 1.38%
Commodities
- West Texas Intermediate crude fell 0.3% to $91.52 a barrel
- Gold futures fell 0.1% to $1,899.50 an ounce
©2022 Bloomberg L.P.
