Stocks' Rout Deepens as Oil Soars and Russian Invasion Raises Recovery Worries

Stock market chart

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U.S. equity markets are sinking as Russia escalates attacks on Ukraine, raising concerns about disruptions of oil and other commodities. The Dow at one point was down more than 600 points, while crude oil approached $107 a barrel. 

Key Takeaways

  • The Dow Jones fell more than 600 points as crude oil surged past $105 a barrel and financial and travel company shares slumped. 
  • Wheat and corn futures traded limit up as both Russia and Ukraine are major exporters, with wheat hitting prices not seen since 2008.
  • Retailers including Target and Walmart are trading higher.

Oil prices are soaring to more than $105 a barrel, the highest they’ve been since 2014. Wheat and corn futures traded limit up as both Russia and Ukraine are major exporters. Wheat prices are at levels not seen since 2008.

Investors continued to put money into haven investments. Bond prices are rising with the yield on the 10-year Treasury note falling another 11 basis points (BPS) to 1.72%. Gold and silver prices are gaining. 

Financial company stocks are declining. Shares of American Express Co. (AXP) are down 6%, while JPMorgan Chase & Co. (JPM) shares are losing 4%. Shares of cruise lines and airlines are dropping because of the potential for higher fuel prices and limits on travel related to the Ukraine conflict. 

Shares of Oil Companies, Retailers Rise

Shares of Chevron Corp. (CVX) and other energy companies are gaining as oil prices rise. Target Corp. (TGT) is the best-performing stock in the S&P 500 after the retailer gave an optimistic outlook for sales. Shares of rival Walmart Inc. (WMT) are advancing also. Albertsons Companies Inc. (ACI) shares are up on the supermarket chain’s announcement it’s begun a strategic review (more below).

 The rally in cryptocurrencies continues as the financial turmoil created by the conflict in Eastern Europe has led to demand for alternative currencies. Bitcoin is trading at about $44,000.

The Russian ruble continued its collapse, while the euro weakened against the dollar.

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Chart of the Day: Manufacturing March

ism

Economic activity in the U.S. manufacturing sector rose more than expected last month as the impact of the omicron variant of COVID-19 eased. 

The Institute for Supply Management (ISM) Manufacturing PMI was 58.6%, up one percentage point from January, and the 21st consecutive month of expansion since the outbreak of the pandemic in the spring of 2020.  

The ISM’s Timothy Fiore explained that while omicron affected the industry in February, there were “signs of relief,” adding that a recovery is expected this month.

Fiore pointed out the report showed a big jump in optimism among the survey participants, with 12 positive growth comments for every cautious one. That compares to last month’s 7-to-1 ratio.

Increase in Demand

Fiore noted demand increased, with the ISM's New Orders Index rising 3.8 percentage points, while the Backlog of Orders Index increased 8.6 percentage points to historic highs. He indicated prices kept rising, but at a slower pace. 

The manufacturers also said they continue to have difficulty filling open positions.

Stock of the Day: Albertsons Companies (ACI)

Shares of Albertsons Companies are almost 9% higher after the second-largest U.S. grocery store chain announced it has begun a board-led review of potential strategic alternatives. 

The owner of Albertsons, Safeway, Jewel-Osco, and other supermarkets said the move is aimed at enhancing growth and shareholder value. It indicated the review would assess balance sheet optimization and capital return strategies, potential transactions, along with other strategic initiatives and responses to inquiries.  

Albertsons explained there is no timetable for the conclusion of the review, and no assurance it will result in any transaction or other strategic change or outcome. The company noted it has retained Goldman Sachs (GS) and Credit Suisse (CIK) as financial advisers to assist in the effort.

Review is Warranted

Chan Galbato, co-chair of the board, added the board feels the continuing strength of the business and the scale of its portfolio of assets warrants a deep and considered look into “all possible paths towards maximizing value creation.” Albertsons operates about 2,300 stores in 34 states.   

The company's sales and those of rival supermarkets were boosted during the COVID-19 outbreak as lockdowns and other pandemic restrictions led many people to buy food to cook at home. Albertsons began publicly trading in June 2020 and shares have more than doubled since then.

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