Volatile Trading & Weekly Comeback – Monday Morning Market Memo – February 28, 2022

Stocks began last week notably lower, due in part to Russian military moves into Ukraine.  At the bottom last week, the Standard & Poor’s 500 Index hit a correction (a drop of 10%) and the NASDAQ Composite briefly entering bear market territory (a drop of 20%).  Stocks rebounded sharply on Thursday and Friday however – with gains on Friday of over 800 points for the Dow Jones Industrial Average and 2.2% for the S&P – it was a dramatic reversal for the major stock market averages.  For the week, the Dow finished only fractionally lower, while the S&P gained .8% and the NASDAQ added on 1.1%.

Factors behind the reversal included investors looking for bargains and “buying-the-dip”, along with media reports Russia was open to negotiations with Ukraine (that positive sentiment of course changed over the weekend).  Additionally, the market is gauging whether the geopolitical turmoil/uncertainty may lead the Federal Reserve to be less aggressive in raising rates.  Along those lines, the CME Fedwatch Tool is now showing only a 9.5% probability the Fed will hike rates by ½ point In March, down from a 22.1% probability on February 18th – so there is currently a 90.5% probability for a ¼ point rate next month – which is a smoother transition for the markets to digest.

In the week ahead we’ll get another handful of fourth quarter 2021 earnings reports, Federal Reserve Chair Powell will update Congress on monetary policy Wednesday and Thursday, while Friday brings the widely followed February Jobs Report.  Companies scheduled to report this week include WorkdayZoom VideoAutozoneHormel FoodsSalesforce.comKohlsTargetDollar TreeBest BuyDomino’s PizzaCostco Wholesale, and Broadcom.  For the jobs report scheduled to be released on Friday morning, market expectations are the U.S. economy added about 400,000 jobs in February, and for the unemployment rate to improve a notch to 3.9%.

In addition to the items above – continued geopolitical unrest, possible ramifications from sanctions on Russia, interest rate and inflation uncertainty – make it likely that market volatility will continue.  As uncomfortable as this volatility can be, we believe in long-term investing and advocate for time in the market, as opposed to timing the market!  While no one can predict the future and past performance is no guarantee of future results, times like this remind us of the stock market saying – your money is like a bar of soap, the more you handle it, the less you’ll have of it.

All the best – Southport Station Financial Management, LLC