- A spike in oil prices sent shivers through risky assets on Tuesday, reversing an early rally in US equities and putting several European markets down 4%.
- Bonds rallied as investors worried about the impact of the war on global economies, with 10-year US rates falling for the first time since December.
- After Apple halted product sales in Russia following the country's invasion of Ukraine, the S&P 500 momentarily extended losses in the final minutes of trading. Crude traded at $105 per barrel, heightening concerns about possible increased inflation, complicating the job of the Federal Reserve at a time when Russia's invasion of Ukraine is considered as a danger to global growth. Bonds rose throughout the curve, with swaps tied to the Fed's March 16 meeting tightening to just 22 basis-points. That means traders aren't expecting a full quarter-point raise, as opposed to last month, when a half-point increase was almost fully priced due to concerns about increasing inflation.
- Biden is under pressure from politicians from both parties to cut off Russian oil and gas imports to the US. Such a step would almost certainly raise gasoline costs, adding to inflationary pressures. At 9 p.m. in Washington, Biden will make his State of the Union address. A US president has not delivered his yearly speech to Congress in such a tense period since George W. Bush set out his case for war in Iraq in 2003, or Barack Obama faced the financial crisis in 2010.
- Meanwhile, Fed's Powell will try to reassure legislators this week that the central bank will move to cool the country's fastest-rising inflation in four decades while remaining flexible in the face of geopolitical risks. Starting on Wednesday, he'll provide a semi-annual monetary-policy testimony to House and Senate panels.
- As the battle in Ukraine approaches a more severe phase, Russia has stated that it will continue its assault. Seven russian banks will be excluded from the EU's rapid financial-messaging system, but the country's largest lender, Sberbank, and a bank partly owned by Russian gas giant Gazprom will be spared.
- The possibility of increasing interest rates, along with Russia's invasion of Ukraine, has put the "stocks-only-go-up" mantra to the test. For the first time in nearly a year and a half, the S&P 500 had back-to-back monthly losses, extending its losses this year to 8.2%, its worst start since the pandemic roiled markets in early 2020. One glimmer of light for investors: the S&P 500 has finished the year higher by at least 9.5% each of the last four times it has closed lower through February.
