Despite a Breakdown in Diplomacy Talks, S&P, Nasdaq, and Dow Are Surging

Oil futures are down below $92 a barrel after hitting $100 yesterday

U.S. equity markets are rallying for a second straight day, despite an apparent breakdown in efforts to start discussions between Russia and Ukraine. The Dow, S&P 500, and Nasdaq are up more than 1% and Europe's Stoxx 600 gained more than 3%.

Key Takeaways

  • Stocks are rising, led by blue chip firms on the Dow Jones index, as investors considered the possibility of fewer rate hikes due to war in the Ukraine.
  • Bond prices fell, while yields gained and crude oil has dropped $10 a barrel since hitting $100 yesterday.
  • Etsy shares are soaring.

Fears of a disruption to oil supplies were reduced after President Biden said the U.S. and its allies are working on releasing crude from their strategic reserves. Oil futures are down below $92 a barrel, down $10 from yesterday, and the price of natural gas, gasoline, and heating oil are lower. Shares of Chevron Corp. (CVX) and other energy companies are gaining as sanctions against Russia could boost demand for U.S.-produced fuel.

Almost all of the stocks in the Dow are higher, led by drugmakers Johnson & Johnson (JNJ) and Merck & Co. (MRK), with shares up more than 4%. Shares of financial firms and big industrial companies are gaining. Still, the Dow is heading for a lower close this week, while the Nasdaq and S&P 500 are poised for a gain. 

Etsy Shares Jump

Etsy Inc. (ETSY) is the best-performing stock in the S&P 500 on its better-than-expected earnings. Dish Network Corp. (DISH) shares are rising following an analyst upgrade. Shares of Foot Locker Inc. (FL) and Beyond Meat Inc. (BYND) are tumbling on their financial reports (more below).

Major cryptocurrencies are rallying as well, with the price of Bitcoin up more than 8%, and Ether higher by 9%. The euro strengthened against the dollar. Commodities, including wheat and corn, fell after surging in recent days.

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Chart of the Day: More Spending, More Inflation

pce

American consumers spent more than expected in January, and the prices they paid increased at the highest annual rate in almost 40 years. 

The Commerce Department reported Personal Consumption Expenditures (PCE) jumped 2.1% last month, well above the 1.6% rise estimated by economists, and a reversal of December’s decline of 0.8%.

The PCE Price Index advanced 0.6% for the month to a year-over-year gain of 6.1%, the most since February 1982. The “core” PCE, which leaves out volatile food and energy prices, was up 0.5% for the month and 5.2% from last year. That was the largest annual increase since April 1983. The PCE is the Federal Reserve's preferred measure of inflation.

Prices for energy goods and services shot up 25.9% from a year ago, and food prices were 6.7% higher. 

Personal Income Flat

The report also showed personal income grew less than 1% in January, and after-tax, or real disposable, income actually declined 0.5%, primarily because of the expiration of a child tax credit. 

Stock of the Day: Beyond Meat (BYND)

Beyond Meat sales declined in the fourth quarter, and the company expects 2022 revenue will fall short of estimates as demand for meat substitutes slows. Shares sank to their all-time low.

The maker of Beyond Burger and other plant-based foods posted quarterly revenue of $100.7 million, a drop of 1.2%, and a loss of $1.27 per share. Both missed analysts’ forecasts. 

Sales at U.S. grocery stores sank 19.5% to $49.98 million. The company blamed softer demand, increased discounts, fewer shipping days, and to a lesser extent, loss of market share.

Beyond Meat noted its business continues to be affected by near-term uncertainty related to COVID-19 and its potential impact, which includes reduced demand levels, less workforce availability, and supply-chain disruptions. It anticipates 2022 net revenue will be in the range of $560 million to $620 million. 

Reducing Expenses

CEO Ethan Brown said while the company will continue to invest in its operations, it expects to “substantially moderate” growth of its operating expenses this year.

Also this week, Canadian rival Maple Leaf Foods Inc. (MFI) reported slowing demand for meat alternatives and indicated its plan to focus on reducing costs.  

Shares of Beyond Meat are down more than 7% today, and they’ve lost nearly a third of their value since the company began publicly trading in May 2019. 

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