Markets mixed as investors weigh the next moves by the Fed

Dow gained 137 with selling into the close, decliners slightly ahead of advancers & NAZ was off 186.  The MLP index crawled up 1+ to the 212s & the REIT index rose 1 to the 488s.  Junk bond funds were mixed & Treasuries saw significant selling, raising Treasury yields.  Oil added 2+ to the 98s & gold was up 9 to 1947 (more on both below).

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A rocket attack on a crowded train station in the eastern Ukrainian city of Kramatorsk has killed at least 50 people & injured more than 80, local authorities said.  Thousands of civilians have been waiting at train stations in the country's east to evacuate as Russian strikes intensify.  Moscow denied being behind the strike & denies targeting civilians despite well-documented evidence to the contrary.  Russian troops in Ukraine's north have withdrawn & at least some of them will be transferred to the eastern Donbas region, the UK's Defense Ministry said.  Ukrainian leaders have warned that the fighting in the Donbas, where Russia has been engaged in military operations for years, is expected to be brutal & resemble the battles of World War II.  Authorities have urged civilians in Ukraine's east to evacuate while they still can.  The devastating attack on the Kramatorsk railway station in eastern Ukraine was carried out by a Russian short-range ballistic missile fired from inside Ukraine, a senior US Defense official said.  The strike killed dozens of people as civilians wait at train stations to flee the eastern part of the country.  The US official added that the US believes the missile was a Russian OTR-21 Tochka, also known as an SS-21 “Scarab” missile.  The SS-21 is a Russian-made mobile, short-range, single-warhead ballistic missile with a warhead payload of about 1000 pounds.  The US military has observed more than 1500 Russian missile launches since the start of the war, according to the official. Russia has focused in particular on the coastal city of Mariupol.  Following the attack on the Kramatorsk train station, the Pentagon announced that it would reposition a Patriot missile battery in Slovakia to bolster air defense systems.

Rocket attack on Ukraine train station kills at least 50 people trying to flee, scores injured

The US economy is at a mounting risk of spiraling into a 1970s-style stagflation crisis as the Russia-Ukraine war exacerbates already sky-high inflation, according to a new analysis.  The Economist Intelligence Unit predicted that consumer prices will continue to hover near a 40-year-high "at least until the middle of the year," weighing on consumer spending and real GDP growth.  The London-based group already lowered its forecast for US GDP this year from 3.4% to 3%.  Combined with an increasingly aggressive Federal Reserve, which lifted interest rates by a qtr-point in Mar & signaled at least 6 more, similarly sized increases this year & the fallout from the Ukraine invasion, the outlook for the US economy is growing bleaker.  "The economic fallout from the war and other external factors, such as the emergence of a new coronavirus variant (which remains our baseline scenario), expose the U.S. to the growing risk of stagflation – low growth combined with high inflation," the analysis added.  Stagflation is the combination of economic stagnation & high inflation, characterized by soaring consumer prices as well as high unemployment.  The phenomenon ravaged the US economy in the 1970s & early 1980s, as spiking oil prices, rising unemployment & easy monetary policy pushed the consumer price index as high as 14.8% in 1980, forcing Fed policymakers to raise interest rates to nearly 20% that year.  A telltale sign & consequence, of stagflation is rising energy prices, according to many economists, who believe it occurs when a sudden increase in the cost of oil reduces an economy's productive capacity.   For instance, in 1973, OPEC imposed an embargo on oil supplies to the US over its support for Israel.  Other economists who believe the US economy is showcasing signs of stagflation today, as the Russian invasion of Ukraine sent oil prices soaring.  Crude prices were steady today & were poised to fall slightly as countries announced plans to release supplies from their stockpiles.

Stagflation risks grow as Ukraine war fuels even higher inflation

In a week that uncovered the extent of Russian atrocities against Ukrainian civilians, an indiscriminate attack on a train station appeared to provide the strongest indication yet that Pres Vladimir Putin remains undeterred in his offensive, even as he faces the prospect of war crime charges.  Ukraine has demanded that Russia be punished for the shelling — & all crimes on their territory.  Western allies & human rights groups have rallied to denounce the indiscriminate civilian attacks.  G-7 foreign ministers responded to the news from Bucha & elsewhere saying they “welcome and support” efforts to investigate potential war crimes & crimes against humanity perpetrated by Russian forces.  “The massacres in the town of Bucha and other Ukrainian towns will be inscribed in the list of atrocities and severe violations of international law, including international humanitarian law and human rights, committed by the aggressor on Ukrainian soil,” they said in a joint statement.  But not everyone is convinced that such measures will be enough to deter the Kremlin from its onslaught.  Ukraine's Pres Volodymyr Zelenskyy has said the Kremlin-led attacks amounted to genocide and called for those responsible to face war crime charges in front of a tribunal — like the one established in Nuremberg, Germany after World War II.  Putin, meanwhile, continues to deny that Russian forces are targeting civilians — despite evidence suggesting otherwise — espousing an alternate reality of Ukraine as the aggressor & insisting that Kyiv has fabricated evidence of war crimes.  That even as satellite footage of the corpse-strewn streets of Bucha dating back to mid-Mar — when the city was under Russian occupation — counter Moscow’s claims.

War crime charges may not be enough to deter Putin even as atrocities mount

Gold futures ended modestly higher, logging a weekly gain as traders brushed off typically negative factors like rising Treasury yields & a stronger $.  Gold for Jun rose $7 (0.4%) to close at $1945 an ounce, leaving it up 1.1% for the week.  The 10-year Treasury yield  traded above 2.7% after trading yesterday at its highest since Mar 2019.  Higher Treasury yields are seen as a negative for gold & other nonyielding assets.  The ICE US Dollar Index, a measure of the currency against a basket of 6 major rivals, was on track for a 1.3% weekly advance after trading at its highest since May 2020 earlier in the week.  A stronger $ can be a negative for commodities priced in the unit, making them more expensive to users of other currencies.  Gold's role as an inflation hedge appears to be buoying the metal, with an important cost of living updated due Tues with release of the Mar consumer price index.  The Russia-Ukraine war also was seen as a factor for gold, given the metal’s status as a haven.

Gold set for a weekly gain, despite rising Treasury yields, dollar

Oil futures ended higher, but logged a 2nd, consecutive weekly decline as several countries joined the US in releasing crude reserves.  West Texas Intermediate (WTI) crude for May rose $2.23 (2.3%) to close at $98.26 a barrel, leaving the US benchmark with a weekly fall of 1%.  Jun Brent crude, the global benchmark, gained $2.20 (2.2%) to finish at $102.78 a barrel, leaving it with a weekly drop of 1.5%.  Crude has seen volatile trade since Russia's late-Feb invasion of Ukraine, with the US benchmark briefly trading at a roughly 14-year high above $130 a barrel in early Mar, while Brent came within a whisker of $140.  WTI had closed at $92.10 a barrel on the eve of the invasion on Feb 23, while Brent had traded at $94.05.  The Biden administration last week announced it would release 180M barrels of crude — at a pace of 1M barrels a day for 6 months — from the US Strategic Petroleum Reserve.  The Intl Energy Agency this week said its member nations would join in, releasing another 60M barrels that would be matched by the US as part of its 180M barrel release.  Oil maintained gains after oil-field services company Baker Hughes said the number of US oil rigs were up 13 from last week to 546.  Compared to a year earlier, the number of oil rigs was up by 209.

Oil suffers second weekly fall after release of crude reserves

Next Tues & Wed the 2 major monthly indices for consumer & producer prices will be released.  They are not expected to show improvement in inflation.  But they get will traders' attention.  For this week, the Dow was off 100 & remains down 1600 YTD.

Dow Jones Industrials