The US Federal Reserve’s interest rate policy and Russia’s ongoing attack on Ukraine remain dominant drivers for equity markets.
Overnight futures are modestly lower on Tuesday morning after the major indexes dropped across the board Monday. S&P 500 and Nasdaq 100 futures are down 0.1%, and Dow 30 futures are unchanged as of 3:30am EDT.
Stocks did stage a rally into Monday’s close but were under pressure for much of the day after Fed Chair Jerome Powell stressed at a National Association for Business Economics conference that “the labor market is very strong, and inflation is much too high."
Powell said the Fed sees “an obvious need to move expeditiously to return the stance of monetary policy to a more neutral level.”
His message was a clear indication that the market’s expectation of 25-basis-point interest rate hikes throughout this year may be low and that one or more 50-basis-point increases may be on the horizon.
Marko Kolanovic, JP Morgan’s Global Head of Macro Quantitative and Derivatives Research and among the most bullish on Wall Street, lowered his target slightly for the S&P 500 on Monday “to reflect macro and geopolitical risks,” though he still expects a rally from current levels.
His new target — 4,900, down from 5,050 — represents 9.8% upside from Monday’s close.
Oil prices rose sharply again on Monday ahead of a summit meeting this week in Brussels that will include President Joe Biden and heads of European governments. On the table will be the critical decision of whether or not European countries join the US in its embargo of Russian oil.
Global benchmark Brent crude futures jumped over 7%, breaching $115 per barrel, while West Texas Intermediate crude futures closed above $112.
There appears to be no substantive progress in ceasefire discussions, and no obvious end in sight to Vladimir Putin’s deadly war.
Key events this week
Tuesday: Earnings from Adobe ( Chart ADBE - $374.96 5.96 (1.615%) ), Carnival ( Chart CCL - $9.23 0.01 (0.108%) , Chart CUK - $8.26 0. (0%) ), COPEL ( Chart ELP - $6.21 0.20 (3.328%) ), GDS ( Chart GDS - $18.77 0.37 (1.933%) ), PagSeguro Digital ( Chart PAGS - $7.89 0.12 (1.544%) )
Wednesday: Fed Chair Jerome Powell to speak at Bank for International Settlements (BIS) Innovation Summit on Panel on Emerging Challenges for Central Bank Governors in a Digital World. Earnings from Exelon ( Chart EXC - $40.24 1.04 (2.653%) ), Cintas ( Chart CTAS - $436.35 3.20 (0.739%) ), Prudential plc ( Chart PUK - $25.28 0.62 (2.394%) ), General Mills ( Chart GIS - $84.80 2.65 (3.226%) ), Trip.com ( Chart TCOM - $36.22 1.17 (3.129%) ), KB Home ( Chart KBH - $40.41 0.84 (2.123%) )
Thursday: Jobless claims, durable goods orders. Earnings from PetroChina ( Chart PTC - $121.70 1.72 (1.434%) ), China Life ( Chart LFC - $0. 0. (0%) ), NIO ( Chart NIO - $9.07 0.20 (2.157%) ), Darden ( Chart DRI - $152.58 2.06 (1.369%) ), FactSet ( Chart FDS - $398.86 6.27 (1.597%) )
Friday: Univ. of Michigan consumer sentiment. Earnings from China Petroleum ( Chart SNP - $0. 0. (0%) ), Banco de Chile ( Chart BCH - $18.98 0.32 (1.715%) )
Examining options market data provided by Tradier API, we have seen significant bull activity in Apple ( Chart AAPL - $160.25 1.32 (0.831%) ) and AMD ( Chart AMD - $97.95 2.33 (2.323%) ) over the past week. After closing at $150.62 a week ago, its lowest close since Nov. 15, 2021, Apple stock has rebounded nearly 10% in the past five trading sessions to close Monday at $165.38. Similarly, AMD stock closed at $102.25 a week ago — its lowest close since Oct. 5, 2021 — and has since recovered over 13% to close Monday at $115.92.
On the bear side of single stock options, we saw strong activity in Amazon ( Chart AMZN - $98.13 0.58 (0.588%) ) and United Airlines ( Chart UAL - $41.36 0.30 (0.72%) ). Amazon stock tested its January lows in early March and have since risen sharply, up nearly 19% in two weeks. United shares have soared nearly 36% from March 7, 2021, to last Friday, March 18, 2021.