Russia-Ukraine Conflict and Inflation Will Continue to Weigh On S&P 500
2022年3月7日 - 2:54AM
Finscreener.org
The equity markets have fallen
for the fourth straight week as the S&P 500 is down 9.5%
from all-time highs. Comparatively, the NASDAQ and Dow Jones
indices have declined by 17% and 8.9% respectively from record
levels. Market analysts expect the markets to remain volatile in
the next week due to the ongoing conflict between Russia and
Ukraine as well as inflation numbers that will be published for
February this Thursday.
Russia
invaded Ukraine
10 days back, following which
several countries part of NATO imposed multiple sanctions on the
country. The S&P Dow Jones Indices also confirmed it will
remove all stocks listed in Russia from its benchmarks and will
declassify the country as an emerging market.
The New York Stock Exchange
paused trading in three Russian ETFs or exchange-traded funds. Due
to a sustained sell-off in Russian equity companies, the
iShares MSCI Russia ETF (AMEX:
ERUS) is down 81% in 2022.
Energy prices soar as inflation remains in
focus
The Russian invasion of Ukraine
has driven oil prices to multi-year highs. The U.S. Benchmark West
Texas Intermediate crude rose by 7% to $115 per barrel while prices
for the global standard Brent crude increased by 6% to
$118.
Comparatively, government bond
yields declined as investors reduced exposure to this asset class.
The 1-year Treasury yield stood at 1.73% and the plunge in interest
rates induced a sell-off in banking stocks.
Due to restrictions over air
space and the threat of rising costs amid high oil prices, shares
of travel companies such as United Airlines
(NASDAQ:
UAL), Delta Air Lines
(NYSE:
DAL), and American Airlines
(NASDAQ:
AAL) fell by 9%, 5.6%, and 7%
respectively.
Comparatively, higher commodity
prices allowed energy stocks to continue their momentum further in
the last week.
Berkshire Hathaway discloses a $5 billion stake in
Occidental Petroleum
During Berkshire
Hathaway’s (NYSE:
BRK.A)(NYSE:
BRK.B)
annual letter to shareholders,
Warren Buffett claimed he could not find an exciting enough company
to invest in at current prices. Instead, Berkshire focused on
improving shareholder wealth by focusing on stock repurchases and
buybacks.
However, an SEC filing on Friday
disclosed Berkshire owned 91.2 million shares of Occidental
Petroleum worth $5.1 billion. The stock surged by more than 17% on
Friday, following this news. Shares of Occidental Petroleum have
almost doubled in 2022, making it one of the top-performing stocks
part of the S&P 500.
Occidental Petroleum (NYSE:
OXY) recently reported a fourth consecutive record
for quarterly free cash flow generation which allowed it to
generate its highest-ever annual level of cash flows last year. It
continues to strengthen the balance sheet and repaid around $2.2
billion of debt in Q4 of 2021.
While the company ended 2021 with
a cash balance of $2.8 billion, it also repaid $6.7 billion of debt
in the last year.
Inflation will remain the focus
While the economic calendar is
relatively light for the upcoming week, investors will closely be
watching the consumer price index for the month of February.
Economists expect inflation to rise by 7.8% year over year compared
to the 7.5% rise in January, which was already the highest since
1982. The consumer price index or CPI includes food and energy
prices.
Investors are worried that rising
inflation will result in reduced consumer spending as well as the
possibility of multiple interest rate hikes. These factors will in
turn lead to higher borrowing costs, tepid top-line growth, and a
contraction in earnings for most enterprises.
Pfizer and Moderna expect to report $51 billion in
vaccine sales in 2022
The world’s largest vaccine
manufacturers Pfizer (NYSE: PFE)
and Moderna (NASDAQ: MRNA)
are expected to report
$51 billion in combined vaccine
sales in 2022. While Pfizer’s vaccine sales are expected to touch
$32 billion, Moderna is forecast to report $19 billion in sales.
These are minimum sales estimates and reflect the contracts already
signed by the two companies.
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