NEW YORK, March 5 ― Geopolitical worries are clouding the outlook for US stocks, even as Russia’s invasion of Ukraine moderates expectations for how aggressively the Federal Reserve will tighten monetary policy in coming months.
Investors have virtually priced out the chances of a hefty 50 basis point rate hike in March, giving a lift to the technology and growth stocks that had been pummelled in recent weeks by anticipation of harsh Fed tightening. Among those, shares of software company Adobe was up over 5 per cent since last week, with Microsoft up over 3 per cent in the same period.
Meanwhile, geopolitical concerns have propelled oil prices, prompting fears of slower growth and higher inflation over the long term. US crude prices topped US$115 a barrel this week and hit their highest levels since 2008, while other commodities such as wheat also surged. For now, however, the run-up in US Treasury yields, which move opposite to bond prices, has stalled. The yield on the 10-year Treasury note climbed over 50 basis points to start the year to 2.065 per cent, but has since pulled back and was last at 1.74 per cent.
Conversely, yield-sensitive financial stocks have struggled, with the S&P 500 banks index down nearly 8 per cent since last week.