Week in Review: Oil Prices Decline But Markets Follow

Week in Review: Oil prices decline but market too worried to care 

The stock market started the week in a hole as oil prices flirted with $130 per barrel. Oil prices eventually cooled off, but the hole was too deep for the market to climb out of given the state of the economy.

The S&P 500 fell 2.9%, the Nasdaq Composite fell 3.5%, the Dow Jones Industrial Average fell 2.0%, and the Russell 2000 fell 1.1%.

The initial spike to $130 per barrel was in anticipation of the U.S. ban on Russian energy imports, which included oil, gas, and coal. On a related note, the UK and EU said they would phase out their Russian energy imports this year, but the UK said it was still exploring options for a ban on gas imports.

WTI crude futures ended the week at $109.10/bbl, which 5.4% lower versus last Friday. The S&P 500 energy sector still rose 1.9%, while the other ten sectors in the S&P 500 sectors ended in negative territory. The consumer staples (-5.8%) and information technology (-3.8%) sectors were the weakest performers.

Despite the retracement in oil, the fact of the matter was that the environment was still inflationary with oil up 45% for the year and total CPI up 7.9% year-over-year in February. That understanding fueled concerns about a slowdown in consumer spending and expectations for the Fed to hike rates more aggressively this year.

More erratic than oil this week was nickel, which soared at the London Metal Exchange (LME) on Tuesday, more than doubling at one point to exceed $100,000 per metric ton before the LME suspended trading for the day.

The Russia-Ukraine situation remained a frustrating one because one headline would lift the market’s spirits only for the next headline to disappoint the market. Ceasefire talks between Russia and Ukraine broke down without any real progress, and the market didn’t believe President Putin’s claims that there was a positive shift in talks.

Treasury yields spiked despite the growth concerns telegraphed in the stock market, presumably because of inflation expectations and cash-raising efforts. That didn’t help risk sentiment. The 2-yr yield rose 26 basis points to 1.75%, and the 10-yr yield rose 28 basis points to 2.00%.

Separately, Amazon.com (AMZN) was the story stock after the company announced a 20-for-1 stock split and a $10 billion share repurchase authorization. AMZN shares were down 0.1% for the week. The other mega-caps performed terribly, evident by the 3.5% decline in the Vanguard Mega Cap Growth ETF (MGK).

Source: Briefing Investor