Stocks Fall on Fed Fears, Ukraine Tensions, and Global Growth Concerns

What you need to know…

The S&P 500 Index ($SPX) (SPY) this morning is down -2.11%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -1.71%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -2.53%.

U.S. stock indexes this morning are sharply lower but remain above Monday’s major lows.  A sell-off in technology stocks is leading the overall market lower today on concern the FOMC will announce plans to raise interest rates in March after the FOMC meeting Wednesday.  Also, heightened geopolitical risks in Ukraine have prompted liquidation of stocks after the U.S. announced that 8,500 troops are ”ready to go” to Eastern Europe to help bolster NATO forces.  Stocks also retreated today after the International Monetary Fund (IMF) cut its 2022 global GDP forecast. 

Today’s U.S. economic data was mixed for stocks.  On the bearish side, the Jan Richmond Fed manufacturing survey fell -8 to a 4-month low of 8, weaker than expectations of 14.  Conversely, the Nov S&P CoreLogic composite-20 home price index rose +1.2% m/m and +18.3% y/y, stronger than expectations of +0.9% m/m and +18.0% y/y. Also, the Conference Board U.S. Jan consumer confidence index fell -1.4 to 113.8, stronger than expectations for a decline to 111.2.

The IMF cut its 2022 global GDP forecast to 4.4% from an October estimate of 4.9%, citing weaker growth prospects in the U.S. and China.

Today’s stock movers…

A slump in technology stocks today is weighing on the overall market on Fed rate-hike concerns. ASML Holding NV (ASML) is down more than -5% to lead losers in the Nasdaq 100.  Lam Research (LRCX), Applied Materials (AMAT), Paycom Software (PAYC), Xilinx (XLNX), Atlassian Corp PLC (TEAM), Datadog (DDOG), Dexcom (DXCM), and Nvidia (NVDA) are down more than -3%.

General Electric (GE) is down more than -7% today to lead losers in the S&P 500 after it reported Q4 total revenue of $20.3 billion, below the consensus of $21.4 billion.

American Express (AXP) is up by more than +3% today to lead gainers in the S&P 500 and Dow Jones Industrials after it reported Q4 EPS of $2.18, well above the consensus of $1.83. 

Across the markets…

March 10-year T-notes (ZNH22) this morning are down -6 ticks, and the 10-year T-note yield is down -2.2 bp at 1.749%.  Higher European government bond yields today are weighing on T-note prices, along with supply pressures as the Treasury will auction $55 billion of 5-year T-notes later today as part of this week’s $188 auction package of T-notes and floating-rate notes.  Losses in T-notes are contained as a slump in stocks and heightened Ukraine tensions have sparked some safe-haven buying of T-notes.  Trading activity in T-notes may be muted until the results of the Tue/Wed FOMC meeting are released Wednesday afternoon. 

The dollar index (DXY00) this morning is up +0.28%.  The dollar index this morning extended Monday’s gains to a 2-week high.  Weakness in stocks today has prompted increased liquidity demand for the dollar.  Also, higher T-note yields today benefit the dollar’s interest rate differentials.  The dollar is also seeing support from expectations for the FOMC on Wednesday to announce their intentions to raise interest rates. 

EUR/USD (^EURUSD) this morning is down -0.56%.  EUR/USD tumbled to a 1-month low today as rising geopolitical tensions in Ukraine have undercut the euro.  The U.S. late Monday announced that 8,500 troops were put on alert for deployment in eastern Europe to bolster NATO forces.  Dovish comments from ECB chief economist Lane weighed on EUR/USD when he said that he finds it "less likely to think about a scenario where inflation is persistently, significantly above 2%, which would require a serious tightening."  A positive factor for EUR/USD was today’s news that the German Jan IFO business climate index unexpectedly rose +0.9 to 95.7, stronger than expectations of a decline to 94.5.

USD/JPY (^USDJPY) this morning is down -0.01%.  USD/JPY this morning is little changed.  The yen garnered some safe-haven support today after the Nikkei Stock Index sank to a 1-year low.  However, gains in the yen were limited after BOJ Governor Kuroda said today that the BOJ needs to continue with monetary easing as  Japan is “very far” from reaching its 2% inflation goal.

February gold (GCG22) this morning is down -0.8 (-0.04%), and March silver (SIH22) is down -0.130 (-0.55%).  Precious metals prices this morning are under pressure from a stronger dollar as the dollar index rose to a 2-week high.  However, losses in gold are limited by falling global bond yields, slumping stocks, and rising geopolitical risks in Ukraine that have boosted safe-haven demand for gold.