Stocks drop, bonds climb amid geopolitical jitters
BNN Bloomberg
Stocks dropped, while bonds joined gains in haven assets amid concern about geopolitical risks and the economic impacts of Federal Reserve policy.
Stocks dropped, while bonds joined gains in haven assets amid concern about geopolitical risks and the economic impacts of Federal Reserve policy.
Most major groups in the S&P 500 fell, with technology and financial shares leading losses. The Nasdaq 100 underperformed amid a selloff in some of its largest companies. Giant chipmaker Nvidia Corp. tumbled after its latest forecast failed to impress investors, while electric-vehicle maker Tesla Inc. slipped after moving toward the bottom of Consumer Reports’ newest annual auto-brand rankings. Treasury 10-year yields dropped below 2 per cent, while gold, the Japanese yen and the Swiss franc climbed.
The U.S. ramped up warnings of a possible Russian attack on Ukraine, with President Joe Biden saying a “false-flag” event may be underway and a top diplomat describing Moscow as moving toward an “imminent invasion.” Russian officials said no invasion of Ukraine was underway and none was planned.
Mortgage rates in the U.S. climbed, with the average for a 30-year loan hitting 3.92 per cent -- up from 3.69 per cent last week and the highest since May 2019, according to Freddie Mac. New home construction fell for the first time in four months, while jobless claims unexpectedly climbed. U.S. companies are grappling with a historically tight labor market, low unemployment and rising wage inflation putting pressure on profit margins, strategists at Goldman Sachs Group Inc. said.
Analysts have cut their profit-margin expectations for 75 per cent of industries and about half of companies in the S&P 500 for the first and second quarters, data compiled by Bloomberg Intelligence show. Companies’ wherewithal to defend profitability amid mounting pricing pressures is becoming a growing issue at a time when the hottest inflation in four decades and higher borrowing costs threaten to crimp growth.
“As we enter the back end of earnings season, stock market fluctuations continue to be driven by two key themes: inflation and Russia,” said Geir Lode, head of global equities at the international business of Federated Hermes. “As the headlines continue to roll in, investors will have to carefully gauge both the inflation and security risk already priced in, as well as the reliability of any political messaging, to prevent any unnecessary knee-jerk trading.”
