Dow tumbled 645 (off early lows), decliners over advancers better than 3-1 & NAZ pulled back 50. The MLP index was flattish in the 195s & the REIT index fell 3+ to the 437s. Junk bond funds declined & Treasuries were heavily purchased. Oil soared a massive 5+ to the 97s & gold rocketed ahead 16 to 1926.
AMJ (Alerian MLP index tracking fund)
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Stocks fell sharply as Russia attacked Ukraine, causing global energy prices to jump & sending investors fleeing for the safety of fixed income assets. The invasion comes as global equity markets were already reeling because of decades-high inflation stemming from the pandemic. The S&P 500 was down 1.5%, as the benchmark plunged further into correction territory. The index sits more than 12% away from its Jan 3 record close. The Dow fell about 700 points & the blue-chip measure is more than 11% off its record. NAZ declined just 0.9%. NAZ opened in bear market territory, down more than 20% from its high in Nov 2021, but has since traded outside that range. The major averages came back from their lows about an hour after the open. The Dow opened down more than 800 points. Moscow launched the military action in Ukraine overnight. There were reports of explosions & missile strikes on several key Ukrainian cities including its capital, Kyiv. Russian Pres Vladimir Putin called the invasion “the demilitarization” of Ukraine & said Russia’s plans do not include the occupation of Ukrainian territories. NATO, the most powerful military alliance in the world, is set to reinforce its presence on its eastern front following Russia's invasion of Ukraine. Pres Biden condemned the attack, saying that “the world hold Russia accountable.” “Russia alone is responsible for the death and destruction this attack will bring, and the United States and its Allies and partners will respond in a united and decisive way,” Biden addded.
Dow drops more than 700 points as Russia attacks Ukraine
Treasury yields saw steeper falls, after Russia invaded Ukraine. The yield on the benchmark 10-year Treasury note dropped more than 8 basis points to 1.894% & the yield on the 30-year Treasury bond fell 7 basis points to 2.207%. Yields move inversely to prices & 1 basis point is equal to 0.01%. The 2-year Treasury yield fell even more sharply, shedding 11 basis points to 1.49%. Treasury yields dropped as investors flocked to the safe haven asset of gov bonds, while gold jumped to its highest level in more than a year. Global markets fell sharply following the news of Russia's attack on Ukraine. Russian Pres Vladimir Putin said in an address that Russia would launch military action in Ukraine. There were then reports of multiple explosions in at least 4 Ukrainian cities. This comes just days after Putin ordered troops into 2 breakaway eastern regions of Ukraine. Pres Biden condemned the attack, saying in a statement that “the world will hold Russia accountable.” The 10-year yield for Russian gov Treasuries jumped above 12%. The escalating conflict has also been pushing up the price of oil, leading to concerns that this could drive overall inflation higher, complicating the Federal Reserve’s strategy of hiking interest rates to rein in rising prices.
Treasury prices surge, yields fall as investors run for safety during Russia-Ukraine invasion
European Commission Pres Ursula von der Leyen announced that the EU is preparing a "determined and united response" to Russia's invasion of
Ukraine, which includes plans for sanctions aimed at restricting the
country's access to technologies & crippling the Russian economy. During
a joint news conference with NATO Secretary General Jens Stoltenberg & European Council Pres Charles Michel, von der Leyen said later she will "present a package of massive "This
package will include financial sanctions that harshly limit Russia’s
access to the capital markets. These sanctions will have a heavy impact.
Russia’s economy has already faced intensive pressure in the recent
weeks and these pressures will now accumulate," von der Leyen added. She describe how the sanctions package "will suppress
Russia’s economic growth, increase the borrowing costs, raise inflation,
intensify capital outflow and gradually erode its industrial basis." Von
der Leyen then explained how another aspect of the planned sanctions
deal with "limiting Russia’s access to crucial technology." "We
want to cut off Russia’s industry from the technologies desperately
needed today to build a future," she said, describing how the goal is to
"weaken Russia’s technology composition in key areas," particularly
those areas "in which the elite makes most of their money." Those technologies, she said, include "high-tech components" & "cutting-edge software." Von der Leyen said the sanctions will "seriously degrade the Russian
economy in all areas in the future," & that Russian Pres Putin "will have to explain this to his citizens," who she believes do
not want to be at war. "It is our shared duty to stand up to the gravest act of aggression on
European soil in decades," von der Leyen continued, adding that Europe is
"hoping for the best, but prepared for the worst."
European Commission president: Sanctions to target Russia access to technology, cripple its economy
Dow is a little above the opening lows, but that doesn't say much. It's not heart warming for investors to hear that the Euro guys are just getting around to come up with tough sanctions. Where were they in recent days? As pointed out above, turbulent markets are going to make it more difficult for the Fed to reduce already high inflation. Today will long be remember by investors.
Dow Jones Industrials
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