Daily Market Color

Rates Rangebound to Closeout Volatile Week

There was no shortage of volatility in this holiday-shortened week as the Russia-Ukraine conflict roiled financial markets:

  • Rates: Long term UST yields/swap rates whipsawed within a 15bps range, falling dramatically Thursday morning before recouping most of the decline later in the day
  • US equities: S&P 500 entered correction territory on Wednesday, but rose Thursday/Friday to finish the week near unchanged
  • Commodities: Gold futures touched their highest since late 2020 ($1,968/oz), crude oil climbed to its highest level since 2014
  • Crypto: Bitcoin fell to a one-month low of $34,000 Thursday day before recovering back near $39,000 on Friday

The Eastern Europe geopolitical tensions will remain the primary focus, where positive sentiment over potential talks between the Russian and Ukrainian governments remains tempered as Russian military forces move closer to taking control of the capital.

Core PCE, the Fed’s preferred gauge of inflation, rose 5.2% in January.  While the reading is in-line with expectations, it marks the biggest yearly rise since 1983.  Inflation has marched higher for 14 months in a row, bringing attention to Fed Governor Christopher Waller’s earlier comment that if “the economy is still running exceedingly hot, a strong case can be made for a 50-basis-point hike in March.” Despite the rapid rise in inflation, consumer spending beat estimates, rising 2.1% after declining 0.8% the month prior.

Week ahead.  Next week is slated to be very data heavy.  February manufacturing and PMI data will kick off the week, followed by ADP private payrolls on Wednesday and initial jobless claims on Thursday. On Friday, all eyes will be on the February jobs report.  The report will give markets a look into the health of the labor market and will likely inform the Fed’s tightening schedule.

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