Over the past week, stocks have gotten more volatile as inflation, interest rate increases and possible conflict in Ukraine are driving headline risk. Today the Dow finished down 171 points at 34,566 on lower trading volume. Over the past week the Dow was down about 1% or 350 points with intraday volatility on the rise. The 10 year US Treasury yield has risen to the 2% range. IBD still has moved markets from rally mode to “markets under pressure” as recent high volume down days pile up. Value stocks like energy, banks and materials continue to outperform growth stocks like technology although chip and cloud stocks are holding up. Overall the markets are fairly valued however uncertainty regarding global events calls for caution.
The Economy and Earnings
The latest inflation reading hit 7.5% which is a 40 year high and is what amounts to an additional $276 per month cost to the average US household. What started as pandemic related inflation specific to certain items has now broadened and is affecting goods and services across all sectors of the economy. As Kathy “Bossy” Bostjancic, economist at Oxford Economics succinctly put it: “It reflects supply constraints both in the goods market and the labor market but it also is a function of still strong demand, particularly from US consumers.” The strong inflation reading is pushing gurus to anticipate a rate hike in March of perhaps 0.5% instead of 0.25% as they race to contain upward price pressures.
Oil prices continue to rise and the International Energy Agency is now saying that chronic OPEC+ undersupply in the face of steady and rising demand could push prices higher as the year unfolds. Oil inventories in developed nations are the lowest level in 7 years. This situation could change if sanctions on Iran are lifted but the bottom line is that for now, oil prices will continue to creep higher. WTI crude finished today at $94.90 per barrel.
Disney reported great earnings as theme park revenue doubled and Disney Plus continued to deliver strong results. Revenue for the quarter was up 34% and net profits jumped 231% in what Bank of America analyst Jessica Reif Ehrlich called “a hulk smash!”. Good one Jess! Shares were higher on the news and Wall Street is expecting Disney to continue its recovery as people flock to theme parks worldwide, set sail on cruise ships coupled with new movies and content set to be released later this year.
Items of Interest
This coming weekend the scout will be at the Klondike derby at Camp Pigott. It should be a fun time but there will be no snow and the temps should be in the mid 40’s.
As a reminder our old toll free 800 number has been canceled due to our office move. From now on please use the regular business line 206-352-9205.