Baker Market Update – wk220311

Markets saw another week of volatility as the conflict in Ukraine continued without a peaceful resolution. A possible bit of good news coming out the conflict this morning as Russian President Vladmir Putin stated in regard to ongoing negotiations with Ukraine, “there are certain positive shifts, negotiators on our side tell me.” I imagine most will take his comments with a big grain of salt, but U.S. equity markets are considering this a step in the right direction with Dow Jones Futures up 300 points ahead of the market opening. Commodity prices couldn’t escape further volatility this week. Nickel prices more than doubled on Tuesday to top $100,000 per tonne before the London Metal Exchange was forced to step in and halt trading for the next few days. President Joe Biden announced Tuesday the U.S. will ban imports of Russian oil, which makes up roughly 8% of the total U.S. imports of oil and refined products. The price of oil hit $129 a barrel shortly after the announcement and has since come down to its current level of $106 a barrel. Treasuries markets saw plenty of volatility this week alongside equity markets as the 10-Year Treasury yield has snuck above 2% again and currently sits at 2.02%.

Yesterday brought more inflation data in the form of Headline Consumer Price Index (CPI) and Core CPI. Headline CPI rose 7.9% from a year ago, the highest level since January 1982 and Core CPI increased 6.4% from a year ago. Gasoline, groceries and shelter were the biggest contributors to the CPI gain. The conflict in Ukraine has only fed into price pressures as sanction against Russian have coincided with surging gasoline costs. The average cost of gasoline in the U.S. currently sits at $4.31.

Wednesday’s Job Opening and Labor Turnover Survey (JOLTS) report continued to show a tight labor market with job openings totaling 11.3 million. Additionally, a small decrease in quits, or workers voluntarily leaving their jobs. Quits declined to 4.25 million, a drop of 3.4% and the lowest number since October. Federal Reserve officials watch the JOLTS report for signs of labor slack. With the unemployment rate at 3.8%, policymakers feel the economy is near full employment.

All eyes are on the Fed next week as they will conclude their meetings Wednesday with an announcement on the Fed Funds Rate to follow. Last week, Chairman Powell stated he was “inclined to propose and support a 25-basis point rate hike.” at the March meeting and is “prepared to move more aggressively by raising the federal funds rate by more than 25 basis points” at one or more meetings if inflation does not come down later this year. Stay tuned and have a great weekend!

National Average Cost of Gallon of Gasoline – March 2021 to Present

Source: Bloomberg, L.P.

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