US Close -Stocks edge lower, ISM Services Index disappoints, No surprises from Day 2 of Powell

US stocks went on a bumpy ride as investors continue to trade off every incremental update with the Ukraine-Russia conflict and following a wrath of mixed US economic data. Stocks were under pressure early after a French official said President Macron’s conversation with Vladimir Putin did not provide any reason to be optimistic that we could see a de-escalation/ceasefire. Wall Street was disappointed after the ISM Service Index posted a third consecutive decline, with business activity, new orders, and employment posting hefty declines. The end of the omicron impact is likely to be impacting the soft ISM Services PMI report, so expectations should be high that a rebound occurs in March.

Risk appetite attempted to make a comeback after Presidential advisor Mykhailo Podolyak said Russia and Ukraine would have a third round of talks. Stock traders face a very choppy market going forward that will likely see pressure as inflationary pressures increase across the board, which will eventually trigger much more aggressive central bank tightening. Investors will struggle to find a reason to pile back in aggressively in stocks until a major de-escalation with the Ukraine-Russia conflict occurs and inflation shows signs of easing.  

Fed

Fed Chair Powell’s testimony reminded traders that aggressive Fed tightening was still possible if the Russia-Ukraine war leads to longer-lasting inflation.   The Fed is still prepared to deliver a series of rate hikes and that they are prepared to do whatever it takes to have stable prices. Powell believes that the labor shortage problem will keep the labor market overheated. 

Traders will await to see if the February employment report shows hiring remained robust, which should pave the way for the Fed to deliver a steady stream of rate hikes despite all the uncertainty with the full impact that the war in Ukraine will have on the economy.   Tomorrow’s nonfarm payroll report is expected to show 415,000 jobs were created in February.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya