Governments and private businesses alike continued to put more distance between themselves and Russia, sending commodities higher but triggering a slump in equities that sent the tech-heavy Nasdaq Composite into a bear market.
Oil soared on Monday as both Congress and the White House reportedly were in favor of moving ahead with banning Russian oil, even if Europe fails to implement similar measures. U.S. crude oil futures jumped 3.2% to a 13-year-high settlement of $119.40 per barrel.
Gold futures, meanwhile, enjoyed their highest finish since August 2020, climbing 1.5% to settle at $1,995.90 per ounce after trading above $2,000 intraday.
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Also, over the weekend, Adobe (ADBE (opens in new tab)), Netflix (NFLX (opens in new tab)), PayPal (PYPL (opens in new tab)) and others joined a growing list of companies at least partially shutting down operations in Russia (opens in new tab). U.S. equities continued to feel the weight of these moves, however. The financial (-3.6%) and consumer discretionary (-4.9%) sectors suffered the deepest losses in a bright-red day for the broader markets.
The Nasdaq was worst off among the major indexes with a 3.6% decline to 12,830 that put it into bear-market territory, off more than 20% from its Nov. 19 high. The S&P 500 (-3.0% to 4,201) and the Dow Jones Industrial Average (-2.4% to 32,817) also finished well in the red.
"The S&P 500 posted the worst day since October 2020," says Cliff Hodge, chief investment officer for financial planner Cornerstone Wealth. "Fear is palpable. There seems to be no evidence of improvements in Ukraine, and the rhetoric out of D.C. continues to get more hawkish.
"While it’s impossible to know where the ultimate bottom may be, from a risk-reward standpoint, the market looks very reasonable. We’re using weakness to add exposure as we continue to see very little chance of recession over our forecast horizon."
Other news in the stock market today:
- The small-cap Russell 2000 declined by 2.5% to 1,951.
- Bitcoin tumbled by 5.1% to $37,560.26. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
- Bed Bath & Beyond (BBBY (opens in new tab)) was a rare splash of green in today's trading, jumping 34.2% on news that Ryan Cohen – founder of online pet company Chewy (CHWY (opens in new tab)) and chairman of video game retailer GameStop (GME (opens in new tab)) – took a 9.8% stake in the home goods retailer via his investment firm RC Ventures. Cohen believes BBBY needs to explore strategic options, which include separating its baby division, buybuy Baby, according to a letter he wrote to RC Ventures' board members. Wedbush analyst Seth Basham maintained a Neutral (Hold) rating on BBBY. "While BBBY shares could move higher on new activist involvement and high short interest, we remain sidelined without more visibility to market share sustainability for the core Bed Bath business," the analyst says.
- Surging oil prices once again weighed on airline stocks. United Airlines (UAL (opens in new tab), -15.0%), Delta Air Lines (DAL (opens in new tab), -12.8%) and American Airlines (AAL (opens in new tab), -12.0%) were some of the day's biggest decliners.
- Uber Technologies (UBER (opens in new tab), -4.2%) lifted its first-quarter adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) to a range of $130 million to $150 million from its previous guidance of $100 million to $130 million. The upwardly revised guidance comes amid increased demand for rides and food delivery, according to the company. "We find Mobility trends in February very encouraging, with trips at 90% and gross bookings at 95% recovered vs. pre-pandemic levels (February 2019), while Delivery annualized run rate gross bookings reached new highs," says CFRA Research analyst Angelo Zino (Strong Buy).
Protect Yourself Against Stagflation
We're increasingly hearing the "S" word being thrown around Wall Street. Stagflation, that is.
Yes, the unemployment rate has recovered to near pre-pandemic lows, but the other two hallmarks – red-hot inflation and slowing economic growth – are certainly at the front door. Several economists have been lowering their U.S. GDP estimates of late, including LPL Financial Chief Economist Jeffrey Roach.
"We currently expect the U.S. economy to grow 3.7% in 2022," he says, down from 4% to 4.5% in LPL's 2022 outlook. (Kiplinger currently forecasts 4.0% (opens in new tab).)
"The risks are to the downside since the Fed may err on tightening too fast, the recent commodity spike may trickle down to the U.S. consumer, and supply-and-demand imbalances may last longer than expected."
Commodities are considered to be among the best defenses against potential stagflation, and you can access them in a number of ways. Exchange-traded funds, such as these 14 ETFs (opens in new tab), allow you to invest in baskets of commodity stocks, futures and sometimes the physical goods themselves.
But those wanting a more concentrated bet might consider individual stock picks. From energy producers to miners, these five "stagflation stocks" represent a short list of commodity-tethered plays that should provide protection should the economy continue to cool while inflation keeps heating up.
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