- The S&P 500 fell back to test the 4300 level on Friday amid a broad, risk-off-driven equity market decline.
- Concerns about the Ukraine conflict and a potential nuclear accident overshadowed a bullish US jobs report.
The S&P 500 fell back to test the 4300 level on Thursday and was last trading down about 1.0% in the 4320 area having bounced ahead of weekly lows around 4280. The drop reflected a broad downturn in the major US indices, with the Dow last down 0.7% and the Nasdaq 100 down 1.2%, as investors continued to fret about the intensification of the Russo-Ukraine war and related commodity price surge. Despite a sharp drop in US bond yields amid intense demand for safe-haven assets, the tech/growth stock heavy Nasdaq 100 index fell to fresh weekly lows, breaking convincingly below the 14,000 level once more. Bearish technicians may view this negative end to the week as opening the door to a return to earlier monthly lows just above 13,000.
A bullish US jobs report failed to lift the mood for US equities, which remained focused on developments in Ukraine, where any meaningful ceasefire remains a distant prospect. Was it not for the overshadowing of Ukraine developments, stronger than expected job gains (indicative of strong economic growth) coupled with a surprise drop in wage growth (less pressure on the Fed to tighten) might have supported equity market sentiment. Instead, markets remained focused on events in Ukraine and fears are rising about another risk posed by the conflict, that of fighting causing an accident at one of Ukraine’s many nuclear plants.
Next week, US equities are likely to continue trading in choppy, unpredictable fashion. “The market is confused,” said one analyst at SoFi, adding that “even on days when we have decent rallies in the market, the VIX has not come down really below 30 and that's pretty high.” “What that tells me is the market cannot decide which direction to go,” they said, adding that “there's a lot of conflicting factors and market participants are trying to weigh which ones are going to be the most important now."
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