Weekly Market Recap – March 4, 2022

The U.S. Department of Commerce reported that the trade deficit in January was -$107.6 billion (vs. -$100.5 billion in December), a record level for the second month in a row. Other monthly economic statistics compared with prior levels, were as follows: the Chicago purchasing managers index 56.3 vs. 65.2, construction spending +1.3% vs. +0.8%, factory orders +1.4% vs. +0.7%, nonfarm payrolls 678,000 vs. 481,000, and the unemployment rate 3.8% vs. 4.0%. Weekly initial jobless claims were 215,000 vs. 233,000.

The week’s financial markets were driven by the Russian military escalation in Ukraine, as investors sold stocks and bought commodities and dollars. The U.S. Dollar index soared 2.0% to 98.50, its highest level in nearly two years (99.97 in May 2020). The equity indices we cover in this report all suffered losses. The NASDAQ Composite fell to 13,313.44 (- 2.8%). Both the DJIA and S&P 500 lost 1.3%, closing at 33,614.80 and 4,328.87, respectively. Stock volatility caused option premiums to increase, taking the CBOE VIX to 31.98 (+15.9%). The S&P GSCI, weighted by energy and metals futures, catapulted 20.1%, closing at 783.31, a 14 year high.

The metals futures that we review all advanced. The base metals steadily increased throughout the week: copper ended at $4.9375 per lb. (+10.1%), and aluminum went out at $3,849.00 per metric ton (+14.6%). Precious metals also rose, as investors returned to the “safe haven” attributes of gold, silver, platinum, and palladium. Their respective closing prices and percentage changes were as follows: gold at $1,966.60 (+4.2%), silver at $25.789 (+7.4%), and platinum at $1,116.80 (+6.4%). The star performer, however, was palladium, skyrocketing to $2,981.90 per ounce, a 26.0% gain from the previous Friday. Russia produces roughly one-third of the world’s palladium.

Given that Russia is the third-largest oil-producing country behind the U.S. and Saudi Arabia, all the energy futures prices on our radar exploded to the upside. Friday settlements and weekly percent increases were: NYMEX WTI at $115.68 per barrel (+26.3%, ICE Brent at $118.11 (+25.5%), heating oil at $3.7763 per gallon (+34.6%), RBOB gasoline at $3.5440 (+23.3%), and natural gas at $5.016 per mmBtu (+12.2%). Readers should note that ICE Europe’s natural gas futures more than doubled (+106.7%) in a week’s time, settling at €192.550 on March 4th vs. €93.147 on February 25th. After the United States, Russia is the second-largest natural gas-producing country in the world.

Of the nine agricultural contract prices we report, four decreased and five increased. Those that weakened were: coffee at $2.2425 (-6.0%), cotton at $116.42 (-1.9%), live cattle at 135.775 (-4.3%) and lean hogs at 100.450 (-3.1%). The winners were: soybeans at $16.60½ (+4.8%), corn at $7.54¼ (+15.0%), wheat at $12.09 (+40.6%), sugar at 19.35¢ (+9.9%), and cocoa at $2,620 (+0.2%). Wheat closed Friday’s session locked limit up; the meteoric rise is attributed to the European/Russian crop supply issues of the war.

Futures Referenced in Market Recap

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