The S&P 500 is down 1.3%, as the Russia-Ukraine situation continues to weigh on sentiment and growth stocks continue to underperform. The Dow Jones Industrial Average (-1.1%), Nasdaq Composite (-1.7%), and Russell 2000 (-1.4%) are also down more than 1.0%.
Briefly, President Biden said Russia could invade Ukraine in a matter of days as it allegedly builds up troops near the Ukrainian border. In addition, Russia claims that Ukraine has committed crimes against residents of the eastern Donbas region, according to The Wall Street Journal , which is being construed as a fabricated excuse to invade.
In turn, nine of the 11 S&P 500 sectors are trading lower, and the 10-yr yield is down eight basis points to 1.97% in a precautionary bid for safety. The information technology (-1.9%) and communication services (-1.5%) sectors are underperforming for the second straight day.
The moves aren’t that drastic, though, as the market tries to stay hopeful that an invasion can be avoided. The energy (+0.2%) and consumer staples (+0.5%) sectors are providing positive support for the market.
The growth stocks, meanwhile, are running into concerns that valuations are still too high. That’s based off the disappointing earnings reaction in NVIDIA ( NVDA 247.67, -17.47, -6.6%) despite its good earnings news, as well as the steeper declines in Fastly ( FSLY 20.07, -8.86, -30.6%) and Matterport ( MTTR 6.51, -1.41, -17.8%) following their earnings reports. DoorDash ( DASH 101.58, +6.57, +7.0%) is a notable exception.
Dow components Walmart ( WMT 137.08, +3.56, +2.7%) and Cisco ( CSCO 56.55, +3.31, +4.3%) are showing strength after beating EPS estimates and announcing plans to repurchase additional stock. WMT is the key driver in the outperformance of the consumer staples sector.
Separately, the latest economic data haven’t been that helpful. Weekly jobless claims increased by 23,000 to 248,000 (Briefing.com consensus 220,000), the Philadelphia Fed Index for February decreased to 16.0 (Briefing.com consensus 20.4) from 23.2 in January, and single-family housing starts declined in every region in January.
From a technical perspective, the S&P 500 is trading back below its 200-day moving average (4457) while its 50-day moving average (4596) continues to decline.
Reviewing today’s economic data:
- January housing starts declined 4.1% month-over-month to a seasonally adjusted annual rate of 1.638 million units (Briefing.com consensus 1.705 million) and building permits increased 0.7% month-over-month to 1.899 million (Briefing.com consensus 1.750 million).
- The key takeaway from the report is the understanding that single-family starts declined in every region in January, except the West (+15.7%), which is likely a function of labor shortages and supply constraints that will keep new supply limited and home prices elevated.
- Initial jobless claims for the week ending February 12 increased by 23,000 to 248,000 (Briefing.com consensus 220,000) and continuing claims for the week ending February 5 declined by 26,000 to 1.593 million.
- The key takeaway from the report is that it covers the week in which the survey for the February employment report was conducted, and the pickup in initial claims could temper some of the growth forecasts for February nonfarm payrolls.
- The Philadelphia Fed Index for February decreased to 16.0 (Briefing.com consensus 20.4) from 23.2 in January.