🎙Things turned sour🥊

Equity markets dived on Monday, and the Dow is not in the correction territory. As oil prices continued to remain elevated after western countries signalled readiness on the possibility of banning Russian oil imports, the risk-off sentiments roll. 

It comes on Sunday night as the US and the European allies appeared to discuss such an idea. More news surfaced that Blinken is considering such a possibility, and Pelosi mentioned in one letter asking her congress colleagues to consider such legislation banning Russian oil. 

🪜Inflation and Commodity Prices🔭

The fall in US stocks reflects the concern with inflation and, more importantly, economic growth gave the rapid rise of commodity prices. As a result, households will be the most hit to curtail their spending. Likewise, higher commodity prices may eat into their profit margin for companies. Hence, it will impact both households and businesses. 

Of course, oil isn’t the only commodity that is of concern. Russia has other commodity production, so if sanction passes beyond oil, the inflation worry could be more widespread. We are already seeing a sharp tick up on the price of wheat, which has climbed by about 70% this year. 

🏀Fed needs to tread carefully🕹

The Fed will have a difficult task to balance. While it intends to increase the interest rate to tame inflation, it will also slow economic growth. Hence, it tends to strike a delicate balance and possibly stick to its modest 0.25% rate hike instead of much higher expectation. Next week’s FOMC meeting will shed light on this insight. 

Before that, we will have inflation data on Thursday. We expect the CPI index to rise 7.8% yearly for Feb, much higher than the previous 7.5% expectation. 

While political tension continued to brew, Putin is also approving the government to pay the creditors by his government and the country’s companies in rubles to avoid the possibility of default. 

If there is no support to the S&P 500, we could see more uncertainty and downward pressure as analysts may lower their target for the year on major indices.