$SPX (S&P 500) vs $RSP (S&P 500 Equal Weight)
$SPX breached its 200-day moving average, as $SPX upward momentum faltered with a -1.90% plunge on Friday after National Security Advisor Jake Sullivan acknowledged there was a “distinct possibility” that Russia could invade Ukraine before the end of the Olympics.
$SPX ended the market week with a loss of -1.82%. $SPX remains resisted by a Downtrend Line coinciding with its all time high VWAP resistance.
It is worth to note further deceleration of deterioration on market technical is witnessed on US Market Net Highs/Lows, with only -65 companies for the week (comparing to -121 companies on previous week).
The immediate support to watch for $SPX this week is at 4,320 level. A breach of 4,320 level would be concerning in mid-term as it would confirm the establishment of a downtrend channel (lower highs, lower lows) on $SPX.
he large-cap indices struggled last week, as risk sentiment was pressured by increased rate-hike expectations and concerns over tensions between Russia and Ukraine. The S&P 500 fell -1.8%, the Nasdaq Composite fell -2.2%, and Dow Jones Industrial Average fell -1.0%. The Russell 2000, however, rose +1.4%.
Wednesday’s Fed minutes may provide a sense of how quickly policymakers want a rate-hike. The U.S. data calendar features January figures on producer prices, which will be closely watched after data last week showing consumer prices hit their highest in 40 years last month.
Meanwhile, earnings season is ending, but not before a last flurry of reports.
Here’s what you need to know to start your week.
1. Geopolitical tensions – Gold & Crude
Wall Street’s three main indexes closed sharply lower on Friday after the White House warned that a Russian attack on Ukraine could begin any day. While stocks got hit, prices for Treasuries, the dollar and other safe-haven assets, such as gold ($GLD) rose.
Crude prices also surged as the prospect of sanctions on Russia, a top producer, added to fears over already tight global supplies.
Some analysts believe soaring crude prices could exacerbate already high inflation, adding to pressure on the Fed to raise rates more aggressively.
2. Geopolitical tensions – Lessons from 2014
In keeping in line with history, we could draw lessons from when Russia invaded the Crimean Peninsula in 2014.
Tensions intensified over February through March in 2014 with the ensuing invasion drove a brief rally in the US 10-year Treasury note from a peak of 3.03% at the end of 2013 to about 2.58% by early February before stabilising in a 2.45%–2.6% range until June. There was a similarly mild and short-lived response in stocks and at a time of many other developments. The S&P500 sold-off by under 6% from late January through early February 2014 and then went on to rally for the remainder of the year.
Russia eventually got heavily sanctioned and the ruble eventually collapses and subsequently drives imported inflation much higher. That scenario in 2014–15 drove the Russian central bank to hike its key rate from 5.5% at the start of 2014 to a peak of 17% by the end of 2014. The Russian economy achieved no growth in 2014 and shrank by 2% in 2015.
Nevertheless, differences to 2014 include the facts that Russia’s military build-up appears to be much larger this time than in 2014 and both Europe and the US appear to be much more supportive militarily. Whether the net effect raises risk, or lowers it given a stronger counter presence is highly uncertain.
3. FOMC
With markets already pricing in a strong chance the Fed will hike rates by half a percentage point at its upcoming March meeting, Wednesday’s minutes from the Fed’s January meeting, will be scrutinized for any indications on how big a move officials are contemplating.
Last month Fed Chair Jerome Powell flagged a March lift-off and said there was “quite a bit of room” to raise interest rates without threatening the recovery in the labor market.
Last Thursday Bullard said in the light of the latest CPI reading he now wants a full percentage point of interest rate hikes over the next three Fed meetings.
On Friday, Goldman Sachs said it now expects seven quarter percentage point rate hikes this year, up from its previous forecast of five, as it updated its forecast following Thursday’s U.S. CPI data.
4. Earnings
Earnings season is drawing to a close, but this week will see a big flurry of notable reports. Airbnb Inc ($ABNB) reports on Tuesday, followed by semiconductor giant NVIDIA ($NVDA) and Cisco Systems ($CSCO), which are both due to report after the close of trade on Wednesday. Deere ($DE), the world’s largest maker of farm equipment reports Friday.
Retailer Walmart ($WMT), known for its everyday low pricing, reports Thursday, and is better positioned than other retailers to withstand rising price pressures. The pandemic has triggered inflation across the supply chain from labor to raw materials, forcing companies to pass higher prices onto consumers. However, many companies could still not fully offset the impact and that hit their profits.
$SPX ended the market week with a loss of -1.82%. $SPX remains resisted by a Downtrend Line coinciding with its all time high VWAP resistance.
It is worth to note further deceleration of deterioration on market technical is witnessed on US Market Net Highs/Lows, with only -65 companies for the week (comparing to -121 companies on previous week).
The immediate support to watch for $SPX this week is at 4,320 level. A breach of 4,320 level would be concerning in mid-term as it would confirm the establishment of a downtrend channel (lower highs, lower lows) on $SPX.
he large-cap indices struggled last week, as risk sentiment was pressured by increased rate-hike expectations and concerns over tensions between Russia and Ukraine. The S&P 500 fell -1.8%, the Nasdaq Composite fell -2.2%, and Dow Jones Industrial Average fell -1.0%. The Russell 2000, however, rose +1.4%.
Wednesday’s Fed minutes may provide a sense of how quickly policymakers want a rate-hike. The U.S. data calendar features January figures on producer prices, which will be closely watched after data last week showing consumer prices hit their highest in 40 years last month.
Meanwhile, earnings season is ending, but not before a last flurry of reports.
Here’s what you need to know to start your week.
1. Geopolitical tensions – Gold & Crude
Wall Street’s three main indexes closed sharply lower on Friday after the White House warned that a Russian attack on Ukraine could begin any day. While stocks got hit, prices for Treasuries, the dollar and other safe-haven assets, such as gold ($GLD) rose.
Crude prices also surged as the prospect of sanctions on Russia, a top producer, added to fears over already tight global supplies.
Some analysts believe soaring crude prices could exacerbate already high inflation, adding to pressure on the Fed to raise rates more aggressively.
2. Geopolitical tensions – Lessons from 2014
In keeping in line with history, we could draw lessons from when Russia invaded the Crimean Peninsula in 2014.
Tensions intensified over February through March in 2014 with the ensuing invasion drove a brief rally in the US 10-year Treasury note from a peak of 3.03% at the end of 2013 to about 2.58% by early February before stabilising in a 2.45%–2.6% range until June. There was a similarly mild and short-lived response in stocks and at a time of many other developments. The S&P500 sold-off by under 6% from late January through early February 2014 and then went on to rally for the remainder of the year.
Russia eventually got heavily sanctioned and the ruble eventually collapses and subsequently drives imported inflation much higher. That scenario in 2014–15 drove the Russian central bank to hike its key rate from 5.5% at the start of 2014 to a peak of 17% by the end of 2014. The Russian economy achieved no growth in 2014 and shrank by 2% in 2015.
Nevertheless, differences to 2014 include the facts that Russia’s military build-up appears to be much larger this time than in 2014 and both Europe and the US appear to be much more supportive militarily. Whether the net effect raises risk, or lowers it given a stronger counter presence is highly uncertain.
3. FOMC
With markets already pricing in a strong chance the Fed will hike rates by half a percentage point at its upcoming March meeting, Wednesday’s minutes from the Fed’s January meeting, will be scrutinized for any indications on how big a move officials are contemplating.
Last month Fed Chair Jerome Powell flagged a March lift-off and said there was “quite a bit of room” to raise interest rates without threatening the recovery in the labor market.
Last Thursday Bullard said in the light of the latest CPI reading he now wants a full percentage point of interest rate hikes over the next three Fed meetings.
On Friday, Goldman Sachs said it now expects seven quarter percentage point rate hikes this year, up from its previous forecast of five, as it updated its forecast following Thursday’s U.S. CPI data.
4. Earnings
Earnings season is drawing to a close, but this week will see a big flurry of notable reports. Airbnb Inc ($ABNB) reports on Tuesday, followed by semiconductor giant NVIDIA ($NVDA) and Cisco Systems ($CSCO), which are both due to report after the close of trade on Wednesday. Deere ($DE), the world’s largest maker of farm equipment reports Friday.
Retailer Walmart ($WMT), known for its everyday low pricing, reports Thursday, and is better positioned than other retailers to withstand rising price pressures. The pandemic has triggered inflation across the supply chain from labor to raw materials, forcing companies to pass higher prices onto consumers. However, many companies could still not fully offset the impact and that hit their profits.