Stocks down as geopolitical factor flips negative
The S&P 500 is down 0.7% in midday action, as investors shy away from growth stocks and react to negative-sounding headlines on the Russia-Ukraine situation. The Nasdaq Composite is down 1.2%, the Dow Jones Industrial Average is down 0.8%, and the Russell 2000 is down 0.6%.
Contrary to Russia’s claims yesterday about withdrawing some troops, Ukraine President Zelensky said he hasn’t seen a withdrawal while NATO officials are saying that Russia is instead building up forces near Ukraine. The Wall Street Journal recently reported that U.S. and Russian aircraft flew dangerously close to each other in three separate incidents over the weekend.
Stocks pushed to session lows following that report from The Wall Street Journal , as it raised concerns about further U.S. involvement in a situation that could potentially get worse. Presently, ten of the 11 S&P 500 sectors are trading lower with information technology (-1.4%) and communication services (-1.1%) down more than 1.0%.
The energy sector, unsurprisingly, is up 1.5% as oil prices top $94 per barrel ($94.22, +2.15, +2.4%) amid the geopolitical angst. The latter has taken precedent over an unexpected build in weekly crude inventories (1.12 million).
Growth stocks, meanwhile, are under additional pressure following the disappointing earnings reactions in Roblox ( RBLX 54.40, -18.92, -25.8%) and Shopify ( SHOP 730.00, -159.33, -17.9%), as well as a multi-year initiative from Google to build more private advertising solutions.
The Russell 3000 Growth Index is down 1.3%, versus an 0.4% decline in the Russell 3000 Value Index.
Separately, the Treasury market has not reacted to the better-than-expected Retail Sales report for January or the continued upwards pressure in Export/Import Prices for January. That could be because of the geopolitical factor that has not only mitigated selling pressure but also led some to believe that the Fed may not be as aggressive in March due to the geopolitical uncertainty.
The 2-yr yield is down four basis points to 1.53%, and the 10-yr yield is down one basis point to 2.04%. The U.S. Dollar Index is down 0.2% to 95.80.
Reviewing today’s economic data, which featured Retail Sales for January:
- Total retail sales for January increased 3.8% month-over-month (Briefing.com consensus 1.9%) following a downwardly revised 2.5% decline (from -1.9%) in December. Excluding autos, retail sales were up 3.3% month-over-month following a downwardly revised 2.8% decline (from -2.3%) in December.
- Retail sales are not adjusted for price changes, so higher prices likely played a part in the strong increase; nonetheless, the key takeaway from the report is that it speaks to a consumer that is still willing and able to spend in spite of the inflation.
- Total industrial production increased 1.4% month-over-month in January (Briefing.com consensus 0.4%) following an unrevised 0.1% decline in December. The capacity utilization rate jumped to 77.6% (Briefing.com consensus 76.8%) from an upwardly revised 76.6% (from 76.5%) in December.
- The key takeaway from the report is that the increase was driven predominately by the output of utilities, which saw its largest increase (9.9%) in the history of the index, which dates back to 1972.
- Import prices rose 2.0% in January after decreasing 0.4% in December. Excluding oil, import prices rose 1.4% after increasing 0.5% in December. Export prices rose 2.9% after decreasing 1.6% in December. Excluding agriculture, export prices rose 2.9% after decreasing 1.9% in December.
- The NAHB Housing Market Index for February decreased to 82 (Briefing.com consensus 83) from 83 in January.
- Business inventories increased 2.1% m/m in December (Briefing.com consensus 2.1%) following a revised 1.5% increase (from 1.3%) in November.
- The weekly MBA Mortgage Applications Index fell 5.4% following an 8.1% decline in the prior week.