Stocks fell on Thursday to close out the worst quarter in two years as market participants continue to digest developments out of Russia’s invasion of Ukraine and President Biden’s decision to carry out the largest release of oil from the US’ reserve in an effort to fight spiking energy prices. The price of crude oil fell roughly -6.50% in response to hover just over $100 a barrel. 

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President Biden unveiled plans to release 1 million barrels of oil a day starting May for the next six months. This is the largest release of reserve petroleum ever in an effort to fight spiking energy prices. Oil spiked to as high as $130 earlier in the month, leading to record prices at the pumps.

President Biden said, “This is a moment of consequence and peril for the world, and pain at the pump for American families. Our prices are rising because of Russian President Vladimir Putin’s actions,” he said. There isn’t enough supply. And the bottom line is if we want lower gas prices we need to have more oil supply right now.” While this is not entirely true (the price of oil had been rising even before), the price of oil dramatically spiked following Russia’s invasion of Ukraine on February 24. 

Meanwhile, Russia forces have continued attacks on Kyiv, Mariupol, and other northern Ukrainian cities despite reports that Moscow was planning to scale back military operations during peace talks in Istanbul. However, US and other officials were skeptical of reports. President Joe Biden said that he won’t “read anything” to the claims “until I see what their actions are.” Biden said the U.S. has no plans to withdraw sanctions or military aid to Ukraine. 

Stocks have had a turbulent start to the year as a number of headwinds — geopolitical turmoil, rising inflation, supply chain imbalances, and central bank monetary tightening – sparking a sell-off in the market. Still, the S&P 500 is up 11% from its lowest level of the year in early March as of Tuesday’s close and just 4% shy of notching a new all-time high after a recent comeback.

“The good news is stocks really appear to love April,” LPL Financial chief market strategist Ryan Detrick said in a note, pointing out the month has closed green every year since 2006 except for 2012. “Not only is it the best month on average since 1950, but it has also been higher an incredible 15 of the past 16 years as well.”

Despite the recent rally, the market continues to face a number of headwinds. Investors are nervously eyeing a flattening yield curve, with longer-duration bonds yields falling below shorter-term term yields. 

The spread, or difference, between the 2-year and 10-year Treasury note yields narrowed to its lowest level since 2019 earlier this week and briefly inverted on Tuesday. A yield curve inversion has a history of predicting a recession, with each of the last eight recessions dating back to 1969 preceded by a yield curve inversion.

Moreover, the US is facing the fastest pace of inflation in 40 years as excess capital, supply-chain bottlenecks, and rising commodity prices cause the price of goods across the board to rise, with February consumer price index rising to 7.9% year-over-year. Unfortunately, March CPI numbers (due April 12), are likely to be worse as the spike in energy and other commodities is priced in. 

The Labor Department’s weekly jobless claims out Thursday show initial unemployment claims ticked up slightly to 202,000 after setting a 50-year low. Economists had forecast a reading of 196,000, according to Bloomberg data.

In its monthly private payroll report, ADP reports payrolls rose by 455,000. Consensus economists were looking for 450,000 jobs to return, according to Bloomberg data. In February, employers brought back 486,000 payrolls, based on ADP’s upwardly revised monthly print.

More jobs data is underway this week, including the all important monthly unemployment report for March on Friday, expected to show another robust reading of 490,000 payrolls added, per Bloomberg economist estimates.

Highlights

  • Occidental Petroleum (OXY) registered a gain of over 100% during the first quarter of 2022, making the oil giant Q1’s top performer in S&P 500.
  • U.S. inflation-adjusted consumer spending fell in February, indicating surging prices are putting a dent in demand. The Commerce Department reported Thursday that purchases of goods and services, adjusted for changes in prices, fell 0.4% from the prior month after logging a 2.1% jump in January.
  • Shares of U.S. lithium miners climbed for a second straight session on Thursday, after a report that President Joe Biden could invoke a law to encourage domestic production of minerals needed to make electric-vehicle batteries.
  • Bluesky, a company funded by Twitter Inc to develop a new operating standard for social media, on Thursday will name its first three employees, more than two years after Twitter co-founder Jack Dorsey first announced the initiative, according to a blog post seen by Reuters. Bluesky is working to build an open protocol for social media with the aim of enabling different social platforms to operate together.
  • Ford Motor (F) said it would halt production at its Flat Rock Assembly Plant in Michigan next week, where it builds the Mustang, due to a global semiconductor shortage.
  • Tesla is extending a production halt at its Shanghai factory for at least one day, an internal notice seen by Reuters showed. The Shanghai factory, located in the Pudong district east of the city’s Huangpu River, suspended production from Monday to Thursday after the city launched a two-stage lockdown to combat a surge in COVID-19 cases.
  • The value of global merger and acquisition (M&A) activity took a 29% hit in the first quarter of 2022 as market volatility fueled by Russia’s invasion of Ukraine pushed the brakes on last year’s breakneck pace of dealmaking. Overall deal volumes fell to $1.01 trillion from $1.43 trillion in the first quarter of 2021, according to Dealogic data.
  • Apple (AAPL) is exploring new suppliers for memory chips used in its iPhones after a key Japanese partner had an output disruption.

“The only impossible journey is the one you never begin.” –Tony Robbins