The stock market capped a turbulent week, by rallying on Friday, as investors ‘weighed all the negatives’; How the Federal Reserve will proceed with interest-rate-increases, and the invasion of Ukraine by Russia. Energy is at the crux of this conflict. Oil prices rose sharply when the invasion began, with brent-crude rising as high as $105 a barrel Thursday morning (2-24-22), the highest level since 2014. European natural gas prices jumped 60%. Both eased a bit as it became clear that most Russian energy wouldn’t face sanctions, yet. Brent settled at $98.57 on Friday’s close. Russia is one of the world’s biggest fossil fuel producers, yielding about 12% of the global economy’s oil (the third-largest producer). Russia supplies 40% of Europe’s natural gas needs. Russian oil, through its massive-pipeline supplies Germany with 25% of its crude. Mr. Biden has much leverage ‘left’. One hopes he will institute more meaningful sanctions as the Russian invasion intensifies. On Friday, the Dow Jones Industrial Average added 834 points or 2.5% to 34058. It was the Dow’s best day since November 2020. The S&P 500 gained 95.95 points, or 2.2% reaching 4384. The Nasdaq Composite advanced 221 points or 1.6% to close at 13694. Bitcoin gained 2.5% as the cryptocurrency moved upward toward $40,000. The yield on the benchmark 10-year U.S. Treasury back near 2%.
Ukraine War Triggers Gold to an Eight-Month High….its highest level since June. Gold has gained in 12 of the past 15 sessions, lifted up by demand from investors nervous that the war will spark losses in other investments, and create worldwide shortages. Investors turn to gold for its stability in times of turmoil. Gold futures have plateaued in the $1,912 a troy ounce on the New York Mercantile Exchange, its highest since their settlement value on June 2. “Investors are looking for a geopolitical hedge,” said Matt Miskin, co-chief investment strategist at John Hancock Investment Management. “The stars are aligning in essence for a gold breakout.” Investors put money into precious metal mutual and exchange-traded funds for the sixth consecutive week through Wednesday, according to data from Refinitiv Lipper. That marks the longest streak since early August 2020, when funds recorded net ‘inflows’ for 20 straight weeks. Analysts expect these pressures on gold to continue as the war escalates.
Americans Start Splurging On Travel And …Having Good Times…as the pandemic eases and fears diminish. More people in the U.S. are satisfying their ‘wonderlust’ finally, and spending big to do it. Companies such as Marriott International Inc., ExpediaGroup Inc., and MGM Resorts International told analysts recently that business is already improving from an Omicron dip and indications point to people ‘eager to live large,’ again. “Premium customers, who after being cooped up for 2020 and the first part of 2021, are traveling and spending again with a vengeance,” Wynn Resorts Ltd. Chief Executive Craig Billings said reporting on the first quarter. As more people travel, Marriott is seeing greater demand for its high-end properties, CEO Anthony Capuano said on a conference call with analysts Tuesday. At Walt Disney Co.’s theme parks, U.S. and worldwide, business came roaring back, with revenue from both domestic and international parks doubling year-over-year. Those who are showing up are spending as much as 40% more per capita than in 2019, Chief Financial Officer Christine McCarthy said last week. MGM’s 65-and-over crowd has now reached pre-pandemic levels in terms of room nights, CFO |Jonathan Halkyard said. He is very optimistic for 2022 and beyond. Airbnb Inc. said it expects international travel to pick up this year. “We’re really optimistic about cross-border travel rebounding and urban travel rebounding,” Airbnb CEO Brian Chesky told analysts. The company has 25% more nights booked for this summer season than it did in 2019, CFO David Stephenson said. “We’re just seeing strong demand for travel. People are ready to travel this summer,” he said. Demand for cruise space is rivaling pre-pandemic numbers, with future bookings soaring. One high-end cruise line offered a 90-day around-the-world ‘super cruise’ at 9 AM on a Wednesday, selling out at 12 noon-with customers taking any level available! Americans are truly ‘splurging on travel again.’
RUMBLINGS ON THE STREET
Daniel Egger, chief investment officer at St. Gotthard Fund Management, WSJ “I do not think that this highly volatile period is all ready to an end, right now we have to focus on what’s happening in Kyiv, how bloody the coming days will be, and I would say definitely the Russian sanctions still can be stepped up.”
Randall W., Forsyth, Writer-Up and Down Wall Street, Barron’s “The future course of Fed policy had been the main thing on which Wall Street was focused, That was until Russia’s attack on Ukraine. Main Street may be less focused on geopolitics, but it could further ratchet up the prices paid at the gas pump and supermarket. So, the pain may be more equally distributed this time.”
Robert Yawger, director of energy futures at Mizuho Securities, called President’s response “soft.” Barron’s “He totally punted on that one,” he said, noting that energy makes up nearly half of Russia’s exports. “Where’s the teeth in the sanctions?”
Carsten Brzeski, global head at Marco at ING, Barron’s “The ECB (European Central Bank) is not living on a different planet, it only lives in an economy which is lagging behind the U.S., explaining the currently still more muted reaction,” wrote Mr. Brzeski. (reaction from ECB chief Christine Legarde)
THE NUMBERS – Barron’s
50% – Record fall in Russia’s benchmark stock index through Thursday from October high
32.6% – Thursday’s yield on a Ukrainian dollar bond maturing in September 2027, up from 16.03% on Wednesday (2-23-22)
$86B – The amount of stock bought back by the 10 biggest S&P 500 repurchasers last quarter, up 30% over 2021’s
5.75% – Percentage of U.S. homes valued over $150,000 with backup generators, up 10 times in 20 years