Geopolitics remains primary driver of volatility

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Published Date 2/28/2022

Last Friday the stock indexes put in a furious rally, the DJIA +835, this morning early selling pushed the index down 478 at 8:45 am ET. The 10 yr. note was unchanged Friday, this morning trading at 1.90% -7 bps. MBS prices began +14 bps.

Not going well in Russia; western sanctions imposed over the weekend targeting Russian banks, companies and individuals led to a collapse in the ruble and prompted the central bank to impose capital controls to try and avert investor panic and shore up the economy.

At 9:30 am ET the DJIA opened -436, NASDAQ -110, S&P -50. 10 YR 1.89% -8 bp. FNMA 3.5 30 yr. coupon at 9:30 am +23 bps and 58 bps better than 9:30 am Friday.

Tensions in Ukraine increased over the weekend with Belarus saying it may send troops to help Russia’s floundering forces.

What will the Fed do in two weeks when the FOMC meets? 50 or 25 bp increase? Inflation already getting out of hand with the Fed dragging feet now more inflation expected, driven by the sanctions placed on Russia. We may get a clue Wednesday and Thursday when Powell testifies to Congress. In the meantime, safety moves continue to keep rates from increasing and the equity markets trading in extreme movements every day.

This Week’s Economic Calendar:

Monday,

9:45 am Feb Chicago purchasing mgrs. index (expected 63.0 from 65.2, as reported 56.3)

Tuesday,

10 am Feb IISM manufacturing index (58.0 from 57.6)

Jan construction spending (-0.2%)

Wednesday,

8:15 am Feb ADP private jobs (+320K)

10 am Jerome Powell at the Committee on Financial Services, U.S. House of Representatives testifying at the semi-annual Monetary Policy Report.

2 pm Fed Beige Book

Thursday,

8:30 am weekly jobless claims (232K, unch from prior week)

Q4 productivity and nit labor costs (productivity expected +6.7%, nit labor costs +0.3%)

10 am Jerome Powell at the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, testifying at the semi-annual Monetary Policy Report.

Feb ISM non-manufacturing index (60.9 from 59.9)

Friday,

8:30 am Feb employment data (unemployment rate 3.9% from 4.0%; non-farm jobs +390K, private jobs 330K; average hourly earnings +0.5% down from +0.7% in Jan, labor participation rate 62.3% from 62.2% in Jan)

Source: TBWS

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Wymac Capital, Inc.

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