Weekly Market Update
Stocks were on pace for a strong week until investors were confronted with two notable headwinds, red hot inflation data followed by a potentially imminent Russian invasion of Ukraine. Entering Thursday morning’s January CPI report (consumer price index), the S&P 500 was up almost 2% on the week. However, the report’s 7.5% headline annual rate of inflation came in at forty-year highs, while signs of deceleration were notably missing, and renewed concerns that high inflation is more persistent than expected. As a result, interest rates continued to climb, and the 10-year US Treasury yield surpassed 2% on Thursday for the first time since 2019. Stocks were initially resilient to the hot inflation data, but hawkish statements by Fed President James Bullard later that day undermined any rally attempt and stocks gave back virtually all of the week’s prior gains on Thursday alone.
Concerns around inflation and interest rates carried into Friday, but geopolitical tensions between Ukraine and Russia took center stage in the afternoon after US Secretary of State Blinken indicated “we’re in a window when an invasion can begin at any time”. Many had expected Russia to wait until after the Olympics ended, so these headlines caused an already precarious stock market to move lower as many traders opted to reduce risk before entering the weekend. As a result, the S&P 500 closed lower by about -1.8% on the week while oil prices jumped to seven-year highs following the invasion headlines. Next Tuesday’s PPI report (producer price index) for January will be very important as investors look to confirm this week’s hot CPI data. However, geopolitical headlines over the weekend now feature prominently in how markets open on Monday, and it could be a particularly choppy first half to next week.
Ian G. Browning, CFA | Director, Investment Strategies & Shareholder
Peter E. Simmons, JD | President & CEO