Stock indices ended the highly volatile week lower as the Ukraine war continues.  Hardest hit was the MSCI Emerging Markets index.  The Russell 2000 small cap index declined the least. 

There were many actions taken the past week to punish Russia for its brutal invasion of Ukraine:

• The U.S. and the U.K. chose to ban Russian oil imports, while other countries have not chosen not to do so at this time.  While oil prices initially surged to a 14 year high, prices ended the week lower. 
• The European Union announced it will prohibit the importation of key iron and steel imports from Russia and the export of luxury goods to Russia. 
• Leaders of the G7 have pledged to work to deny Russia most-favored nation treatment for key products which helps Russia equal tariff treatment.  The U.S. Congress is preparing legislation to remove Russia’s most favored nation trading status. 
• The U.S. banned imports from Russia such as seafood, vodka and diamonds as well as the export of luxury goods to Russia and Belarus. 
• No action has been taken to limit the importation of metals as these are deemed essential for U.S. industry and defense.
• No action has been taken yet to expand sanctions to Gazprombank and other banks which are used for the export of oil.

Inflation is increasing in the U.S. and globally and central banks are shifting from stimulus to fighting it.  The European Central Bank met and announced it would complete asset purchases in the third quarter.  This may pave the way for an increase in short term interest rates which are currently negative 0.5%.  The U.S. Federal Reserve has completed its bond purchases and is expected to hike short term rates from near zero in their meeting next week.

Treasury yields rose with the 30-year bond yield at 2.357% and the 10-Year note at 1.997%.  Crude oil prices eased to $109.47 a barrel and natural gas fell to $4.881 per MMBTUs.  The U.S. dollar index rose to 99.11 and gold rose to $1989 an ounce.

In the economic numbers:

• The Commerce Department reported that the U.S. trade deficit rose 9.8% in January from December. 
  • Imports rose and exports fell.
  • Imports of vehicles and energy rose the most on strong consumer demand. 
  • The increase is adjusted for seasonality but not for price increases.

• China reported producer prices rose 8.8% in February, down from 9.1% year over year in January.
• The U.S. Treasury reported that the U.S. deficit in the month of February was $217BN, down from $311BN last February.  This follows a monthly surplus of $118.7BN in January.
  • Tax receipts rose 17% from last February mainly due to increased individual income and payroll tax withholdings as many more people are working. 
  • Spending in February declined 9% from last year.
• The Labor Department reported:
  • There were 11.3M job openings in January down from the record 11.4MM in December. 
  • Consumer prices were up 7.9% in February from a year earlier up from 7.5% year over year in January.
    • For the month of February prices rose 0.8%.
    • Excluding volatile food and energy, prices were up 6.4% year over year and 0.5% for February.
    • Used cars and energy had the largest gains from a year ago.
  • First time claims for unemployment were 227,000, up from the prior week’s revised 216,000. 
  • The 4-week moving average of claims, designed to smooth out volatility, rose to 231,250.
  • Continuing claims increased from 1.47MM to 1.49MM in the week ending February 26^th .  
  • For the full unemployment report go here:  https://www.dol.gov/ui/data.pdf .
• The EIA weekly oil report is here: http://ir.eia.gov/wpsr/wpsrsummary.pdf .  Also, the EIA reported in the prior week:
  • Field production of crude oil was unchanged at 11.6MM BPD.
  • Natural gas storage fell 124BN cubic feet and is below the 5-year average at this time of year.
• Baker Hughes reported the number of active oil rigs rose to 527.  The number of active natural gas rigs was rose 5 to 135.

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Loren C. Rex, CFP^®, MA                                                                     Erik A Smith, AIF®

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Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC.  Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor.  Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.

 These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.  The Indices mentioned are unmanaged and cannot be invested into directly.