Markets settle lower as Russia-Ukranian talks end

Dow dropped 168, decliners over advancers 5-4 & NAZ finished up 56.  The MLP index gained 5+  to the 193s befitting from oil's big gain & the REIT index dropped 7+ to 451.  Junk bond funds saw only minor fluctuations & Treasuries surged with strong demand, taking the yield on the 10 year Treasury down 14 basis points, finishing under 1.85%.  Oil shot up 4 to the 95s & gold settled 18 higher at 1906 (more on both below)

AMJ (Alerian MLP Index tracking fund)

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Russia's central bank has shut down the country's stock exchange for the week as the ruble plummets amid mounting sanctions imposed by other nations over Russian Pres Vladmir Putin's invasion of Ukraine.  The Bank of Russia announced that the Moscow Exchange would not open some sections of the market for the day in light of the "current situation," before sending a 2nd alert saying trading would be entirely suspended until Mar 5.  Russian-related exchange-traded funds took a hit.  The decision comes as the central bank scrambles to try & mitigate steep, coordinated economic sanctions imposed by several other countries, including the US & as the ruble hit a new record low versus the $.  The Bank of Russia also signaled it would resume buying gold on Mon & raised its key interest rate to 20%, up from 9.5%, in an effort to fight the depreciation of the ruble & higher inflation.  NATO allies & other nations have taken action to inflict economic pain on Russia as Putin continues his bloody assault on Ukraine.  Select Russian banks are set to be removed from the SWIFT intl banking network by the EU & the Bank of Russia has also been targeted directly with sanctions from the Biden administration.  A senior White House official said today, "Our strategy is to make sure that the Russian economy goes backward as long as President Putin decides to go forward with his campaign."

Russia's central bank makes unprecedented move as war rages

The average US. price of a gallon of regular-grade gasoline spiked 10¢ over the past 2 weeks to $3.64 per gallon (3.8 liters).  Industry analyst Trilby Lundberg of the Lundberg Survey said that the price jump came after a rise in crude oil costs amid global supply concerns following Russia’s invasion of Ukraine.  Lundberg said further increases are likely.  The price at the pump is about a $ higher than it was a year ago.  Nationwide, the highest average price for regular-grade gas is in the San Francisco Bay Area, at $4.86 per gallon.  The lowest average is in Houston, at $3.14 per gallon.  According to the survey, the average price of diesel is $4.02 a gallon, up 12¢ over 2 weeks. 

Average US gas price spikes to $3.64 and climbing

White House press secretary Jen Psaki said the US needs to decrease its reliance on foreign oil by switching over to renewable energy, not increasing domestic production.  "We need to reduce our dependence on foreign oil, on oil in general, and we need to look at other ways of having energy in our country and others," Psaki added.  "We've seen over the last week or so... a number of European countries are recognizing they need to reduce their own reliance on Russian oil."  Her comments come as fears grow that energy prices could continue to rise amid Russia's ongoing war in Ukraine, with many NATO countries such as Germany dependent on Russian oil to fuel their countries.  That dependence has also limited the intl response to Russia's invasion, with sanctions being specifically designed not to target Russian fuel exports amid fears such a move could send energy prices soaring in Europe.  The comments also come after the Biden administration last week began delaying decisions on new oil & gas leases after a federal judge blocked the administration from using higher climate change cost estimates when regulating polluting industries.  The ruling stems from Pres Biden's decision on his first day in office to restore the climate cost estimate to $51 per ton of carbon dioxide emissions, up from the $7 it was slashed to during the Trump administration.

Biden admin dismisses calls to increase oil production at home

Ukrainian & Russian officials wrapped up a critical round of talks today near the border with Belarus.  Officials from both countries said the sides could hold more negotiations amid Moscow's invasion of Ukraine.  Ukraine's armed forces continue to hold off Russian troops, defending & retaining control of key cities, & slowing Russia's advance on Kyiv.  Meanwhile, the central bank of Russia more than doubled its key interest rate today, as the ruble plummeted after heavy sanctions were imposed on Moscow by the West.  Pres Biden held a call with its allies today to discuss the ongoing armed conflict in Ukraine.  Biden spoke from the Situation Room with European Commission Pres Ursula von der Leyen, European Council Pres Charles Michel, Pres Emmanuel Macron of France, Chancellor Olaf Scholz of Germany, Prime Minister Mario Draghi of Italy, NATO Secretary-General Jens Stoltenberg, Pres Andrzej Duda of Poland, Pres Klaus Iohannis of Romania, Prime Minister Boris Johnson of the UK, Prime Minister Justin Trudeau of Canada & Prime Minister Fumio Kishida of Japan.  In a UK readout of the call, Johnson welcomed Germany's defense spending increase & transfer of military equipment to Ukraine.  Johnson also called on allies to respond to the emerging humanitarian crisis on Ukraine's borders.

Russia and Ukraine say first talks have ended, Macron urges Putin to stop attack

Gold up nearly 6% in Feb, largest monthly rise since May.  Gold futures shot higher today, with prices settling back above $1900 after the US & its allies added new sanctions against Russia over the weekend as a result of its invasion of Ukraine last week.  Those sanctions include prohibiting any transactions with the Central Bank of the Russian Federation, as well as Russia's national wealth fund & the Russian Ministry of Finance.  Apr gold rose $13 (0.7%) to settle at $1900 an ounce after trading as high as $1935.  Prices based on the most-active contract, which finished down 0.6% last week, gained 5.8% for the month of Feb -- the largest monthly rise since May.  Meanwhile, one market strategist said that gold values should be more elevated & speculated that Russia may be liquidating some gold reserves to garner cash against the barrage of financial sanctions it is facing.  Russia's ruble marked an all-time low against the $, but that decline had moderated somewhat, down over 13% to 95.07 after trading at 119.25 per $ at its low.  Trading has been described as thin & volatile.  That decline came after Russia's central bank raised a key lending rate 20%.

Gold settles back above $1,900 as sanctions hit Russia, fueling a rush into ‘precious havens’

BERLIN - E.ON, Europe's largest operator of energy networks, rejected demands to shut down the Nord Stream 1 gas pipeline as part of sanctions against Russia for invading Ukraine.  After the German gov put the Nord Stream 2 pipeline on hold last week, Polish Prime Minister Mateusz Morawiecki on Sat called for shutting down Nord Stream 1, which has transferred Russian gas to Germany since 2011.  Nord Stream is a joint venture of Russia's Gazprom, Germany's oil & gas producer Wintershall DEA, PEG Infrastruktur E.ON, Dutch Gasunie & French Engie.  E.ON, which holds a 15.5% stake in Nord Stream 1, said the project was "completely different from the ongoing discussions about the Nord Stream 2 line."  "Nord Stream 1 is a permitted and fully operational gas import pipeline," a spokesperson for the company said, adding that the line's capacity was fully utilized in the past 2 years.

Germany's E.ON rejects halting Nord Stream 1 pipeline

Oil prices were up sharply today, with global benchmark Brent crude topping $100 a barrel, after the West imposed more sanctions on Russia, a key energy producer, due to its ongoing invasion of Ukraine.  Also, a report said that the US & other major oil-consuming countries were weighing the release of 70M barrels of oil from emergency stockpiles in response to surging crude prices.  West Texas Intermediate crude for Apr was up $3.26 (3.6%) at $94.85 a barrel after trading as high as $99.10 in earlier activity.  Global benchmark Apr Brent crude was up $2.68 (2.7%) to $100.61 a barrel, after topping $105 at its session high.  The contract expires at the end of the session.  The more actively traded May contract was up $3.31 (3.5%) at $97.43 a barrel.  Members of the Intl Energy Agency, a Paris-based group whose members include most industrialized nations, could agree as early by tomorrow to tap their national strategic oil reserves, a report said, citing European & Persian Gulf officials.  A journal reported it would include 40M barrels from the US.  Oil prices had jumped after the US, the EU & the UK over the weekend said they would block some Russian banks from the SWIFT messaging system, a move that makes it more difficult for countries to purchase Russian oil.  The US Treasury today said it’s prohibiting any transactions with the Central Bank of the Russian Federation, as well as Russia's national wealth fund & the Russian Ministry of Finance.  OPEC & its allies (OPEC+) are scheduled to meet Wed to make a decision on Apr oil production levels. 

Brent oil prices end above $100 a barrel on new Russia sanctions as U.S. and others eye release from oil reserves

Another wild, volatile day in the stock market.  And that means very volatile!!  Expect more of the same tomorrow.  Keep in mind that releasing oil from reserves is only a temporary fix.  The Dow is down 1200 in Feb & 2450 YTD. 

Dow Jones Industrials

Mixed markets as heavy sanctions are imposed on Russia

Dow dropped 152, modestly ahead of decliners & NAZ went up 83.  The MLP index rose 4+ to the 202s & the REIT index fell 5+ to 453.  Junk bond funds only fluctuated & Treasuries were very heavily sold, taking the yield on the 10 year Treasury down a huge 11 basis points to 1.88% (more below).  Oil jumped almost 4 to the 95s & gold soared 27 to 1910.

AMJ (Alerian MLP index tracking fund)

CL=F Crude Oil 95.42     +3.83 +4.2%

GC=F Gold     1,918.80   +31.20 +1.7%

 

 

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The US is blocking financial transactions of Russian central bank assets, effectively freezing any of those assets held by Americans.  The freeze is effective immediately, a senior administration official said in a briefing today.  The official said that the US's actions are in conjunction & cooperation with the EU, Japan, the UK, Canada & others.  This means that not only will Russia not be able to access funds in $s, they will be unable to use $s in the other countries turn to other banks & other currencies.  By making the move effective immediately, before markets open, the official said, Russia will be unable to move assets to avoid or mitigate the consequences.  "Our strategy," the official said, "is to make sure that the Russian economy goes backward as long as President Putin decides to go forward with his campaign."  Russian Pres Vladimir Putin held a meeting with economic advisers on the global sanctions hammering his country, calling the West an "empire of lies."  Among those present at the Kremlin meeting was Russian Central Bank Governor Elvira Nabiullina, First Deputy Prime Minister Andrei Belousov, Deputy Prime Minister Alexander Novak & Finance Minister Anton Siluanov.  The intended effect, the official added, is to cripple the Russian economy & use up the country's "rainy day fund" as their currency, the ruble, plummets in value.  That rainy day fund was built up to defend against economic consequences when Russia invaded Crimea in 2014.  According to the Treasury Dept's Office of Foreign Assets Control (OFAC), this is not a complete & total block of the central bank, as OFAC is authorizing certain transactions with Russia's central bank that are "energy-related," & that additional authorizations could follow if necessary.

US effectively freezes Bank of Russia assets held by Americans

Ukraine has vowed it will not surrender to Russia, as talks are held between delegates from both countries following days of clashes across Ukraine.  “Ukraine is ready to continue seeking a diplomatic solution, but Ukraine is not ready to surrender or capitulate,” Foreign Minister Dmytro Kuleba said.  The comments come as Ukrainian & Russian officials hold talks in Belarus, which neighbors the 2 countries, aimed at de-escalating hostilities following Russia's invasion of Ukraine last week.  Going into the discussions, Ukraine said it wants an immediate cease-fire & the withdrawal of Russian forces, which have attacked various cities & areas of northern, eastern & southern Ukraine.  Meanwhile, troops are approaching the capital Kyiv from the north.  Kuleba said he did not know whether the talks were still ongoing & was unconvinced they would be successful.  “I’m a diplomat, I have to believe in the success of talks, but at the same time my main goal as a diplomat now is to impose more sanctions on Russia, to bring more weapons to Ukraine and to isolate Russia as much as we can in the international arena so I’m focused on this part of diplomacy,” he said.  “We stand not only for ourselves but for the world order as we all know it,” he added.

Ukraine 'not ready to surrender or capitulate' to Russia, foreign minister says

Treasury yields slid, as investors monitored developments in the Russia-Ukraine conflict.  The yield on the benchmark 10-year Treasury note slid nearly 12 basis points to 1.866% & the 30-year Treasury slid more than 8 basis points to 2.211%.  Yields move inversely to prices & 1 basis point is equal to 0.01%.  Investors have been piling into safe haven investments like gov bonds since Russia launched an invasion on Ukraine Thurs, which has pushed yields lower.  Russia continued to advance into Ukraine over the weekend. Russian military vehicles entered Ukraine's 2nd-largest city Kharkiv, with reports of fighting taking place & residents being warned to stay in shelters.  Russian Pres Vladimir Putin put his country's nuclear deterrence forces on high alert yesterday amid a growing global backlash against Russia's invasion of Ukraine.  Despite the escalation, Ukraine's Defense Ministry said representatives for Ukraine & Russia have agreed to meet on the Ukraine-Belarus border “with no preconditions.”  Western allies have announced more sanctions against Russia.  The US, European allies & Canada agreed Sat to remove key Russian banks from the interbank messaging system, SWIFT.

Treasury yields slide as fresh sanctions are imposed on Russia

Escalation of sanctions against Russia amid an ongoing conflict in Ukraine stoked further uncertainty over the outlook for global financial markets.  Russia has lost just about all its friends which will increase pressure on it to end this disastrous war.  Prices on stocks along with safe haven gold & Treasuries will react to developments in these talks.  Dow sold off 500 in early trading, but buyers have trimmed the loss.  The volatility index index is in the 29s, about double where it has been for many years.

Dow Jones Industrials

 

Markets jump on hopes for diplomacy with Russia

Dow skyrocketed 834, advancers over decliners 4-1 & NAZ advanced 221.  The MLP index rose 3+ to the 197s & the REIT index recovered 9+ to the 457s.  Junk bond funds continued higher & Treasuries had some selling bringing higher yields.  Oil slid back to 92 & gold sank 34 to 1891 (more on both below).

AMJ (Alerian MLP Index tracking fund)

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The Census Bureau's latest data showed new orders for transportation durable goods jumped $4.3B (1.6%) to $277.5B, double the expectations for a 0.8% rise.  Excluding transportation, new orders were up 0.7%, beating the estimate of 0.4%.  Revised numbers from Dec showed a 1.2% increase in durable goods orders for items like computers, washing machines, & other equipment expected to last more than 3 years, after last month's report showed a decrease of 0.7%.  Today's report indicated that a surge in transportation equipment, now up 3 months in a row, led the increase with a 3.4% surge of $2.9B, totaling $87.6B in Jan.  Shipments of durable goods have risen 8 of the last 9 months, up 1.2% to $270.4B last month after a 1.3% increase in Dec.  The increase in Jan was led by shipments of machinery, which have climbed 10 of the last 11 months.

Durable goods orders jump much higher than expected

Pending home sales fell for the 3rd month in a row in Jan, amid all-time low inventory & sky-high prices.  The latest data from the National Association of Realtors (NAR) shows contract signings for home sales dropped 5.7% last month, when the number of available homes on the market hit a record low of 860K units.  "With inventory at an all-time low, buyers are still having a difficult time finding a home," said NAR chief economist Lawrence Yun.  The Pending Home Sales Index showed a decline in sales across 3 of the 4 major regions in the US with sales in the West actually seeing a boost last month.  Pending home sales dropped by 12.1% in the Northeast in Jan, 6.3% in the South & 5.9% in the Midwest.  The West saw contracts increase by 1.5%.  Year over year, total sales fell by 9.5%, with all regions posting declines.  "Given the situation in the market – mortgages, home costs and inventory – it would not be surprising to see a retreat in housing demand," Yun added.  Mortgage interest rates have been on a steady climb, with the average 30-year fixed-rate product hitting 4.06% this week – nearly a full percentage point higher than where it sat a year ago according to the Mortgage Bankers Association.  The MBA's latest numbers indicate a 13.1% drop in mortgage applications from a week ago, while the average loan size has hovered around $453K.

Pending home sales slump

The North Atlantic Treaty Organization NATO) agreed to activate its NATO Response Force for the first time ever in a defensive capacity to respond to the Russian invasion of Ukraine, Secretary General Jens Stoltenberg told reporters.  The NATO Response Force consists of 40K highly trained & combat ready soldiers from NATO countries, but Stoltenberg said only part of the force was being called up.  In a separate statement, NATO Supreme Allied Commander Gen Tod Wolters said the alliance has “operationally aligned its maritime, land, air, space & cyber forces to defend our NATO sovereignty.”  Wolters said the troops “represent a flexible, combat credible force that can be employed in multiple ways and we are utilizing fully their inherent agility.”  “As NATO establishes this enhanced vigilance on the alliance’s eastern flank, allied military forces will posture and exercise to increase our readiness and interoperability,” he said.  “Your soldiers, sailors, airmen, and marines stand ready to protect every meter of Allied territory.”  The announcement followed an emergency meeting today of the leaders of all NATO member states, as well as the leaders of Sweden, Finland & the EU.  Pres Biden has pledged that he will not send American troops into Ukraine, which is not a member of NATO.  But as fighting in Ukraine intensifies, NATO states bordering the besieged country are on high alert.

NATO readies response force as Russia assaults Ukraine, threatens Finland

Gold moved lower, with prices poised to post their first weekly loss in 4, pressured by a higher reading on US inflation as investors keep an eye on the conflict in Eastern Europe.  Russia said it was willing to send a delegation to Minsk, Belarus, for talks with Kyiv.  The news help to ease haven demand for gold.  Apr gold was down $39 (2.1%) lower at $1886 an ounce, following a 0.8% gain for bullion yesterday.  The metal had touched on intraday high on that session at $1976 — the highest for a most-active contract since Sep 2020.  For the week, the most-active gold contract was headed for a loss of 0.7%, the first weekly loss in 4 weeks.  Among the US economic data today, the Federal Reserve's favorite inflation calculator rose by 0.6% in Jan.  The increase in the personal consumption expenditure price index points to still-intense inflationary pressures in the US economy, with the gauge having climbed 6.1% in the past year to mark the fastest rate since 1982.  Also, the reading on consumer spending rebounded in Jan & increased by a sharp 2.1% — more than the 1.6% gain expected.  Meanwhile, orders for durable goods rose 1.6% last month, compared with the 0.8% rise expected.  Despite the day's pullback, gold enthusiasts see gold holding a compelling case for prospective investors in a diversified portfolio, particularly as the clash in Eastern Europe continues.  Today, Russian forces closed in the capital of Kyiv & Ukranian Pres Volodymyr Zelensky vowed not to surrender the city, which was coming under fire from Moscow.

Gold ends lower, marks first weekly decline since January on Russia-Ukraine developments

Oil futures declined as investors continued to monitor Russia's invasion of Ukraine, a day after crude briefly topped the $100-a-barrel threshold for the first time in over 7 years.  News reports said Russia was in favor of talks with Ukraine pressured prices, though few details were available & traders remained cautious.  West Texas Intermediate crude for Apr fell 65¢ (0.7%) to $92.16 a barrel.  The US benchmark yesterday hit an intraday high of $100.54.  It trades about 2% higher for the week.  Apr Brent crude, the global benchmark, was down $1.44 (1.5%) at $97.64 a barrel.  The contract, which trading as high as $105.79 yesterday, is up over 4% for the week.  The more actively traded May contract fell $1.05 (1.1%) to $94.37 a barrel.  Crude drifted lower after news reports, citing a summary of a call between Russian Pres Vladimir Putin & Chinese leader Xi Jinping provided by China's Foreign Ministry, said Russia was ready to conduct negotiations with Ukraine.  Yesterday oil ended with gains but well off session highs above $100 a barrel, with the pullback tied to relief that a new round of sanctions announced by the US & its allies against Moscow didn't target Russia's energy exports or cut the country off from the SWIFT payment system.

Oil pares weekly gain as traders weigh market risks tied to Russian invasion of Ukraine

Buyers returned to bid prices higher off depressed lows.  There is a lot of pressure on Russia from countries & companies which do business in Russia.  The Ukrainians also also putting up a spirited defense.  Chances are great that Russia will continue its fight in the Ukraine next week which will be a major driver for the stock market.  After the 2 day rally, Dow finished down 20 for the week, but is still 1000 lower in Feb.

Dow Jones Industrials