Global Terrorism
Thursday night between the hours of 7 p.m. and 8 p.m. (19:00 to 20:00) on the East Coast, equity index futures sold off sharply as capital flowed rapidly into gold futures and US Treasury securities, compressing the entire yield curve. The intensity of that early evening market pressure eased as the hours passed. The catalyst for those sharp moves will not soon be forgotten, however, as it becomes difficult to imagine the logic behind such aggression.
Since I was a 17-year-old boot, I have always wondered where I would draw the line... where I would be willing to not comply with orders coming down through my chain of command. I am pretty sure that an order to shell a nuclear power plant would have, or should have, caused similar alarm and doubt among the troops ordered to carry that mission out.
By early morning in Eastern Europe, Ukrainian officials had reported that the fire caused by Russian forces at a training facility within the nuclear power plant's compound had been put out. There were apparently no casualties nor any unusual radiation levels reported. However, those Russian forces had seized control of said power plant. Supposedly four of the plant's six reactors were being cooled under safe operating procedures. No news on the other two reactors is a good thing?
Globally, heads of state condemned Russia's attack on the Zaporizhzhia site. US President Joe Biden asked for a ceasefire in that area. One must ask here, just what is the objective of the Russian army at this point? Is it to take control of Ukraine and remove the current Zalenskyy regime, even at the cost of destroying the entire country? Obviously, public terror is part of the plan, when a military bombs civilian centers indiscriminately, laying waste to hospitals, schools and residential areas. This even goes to another level. This, I think, had to be an attempt at regional or even global terror. Was this attack an attempt to provoke NATO forces into acting in some kinetic way?
Why would any military that obviously runs into difficulty just fueling its vehicles and feeding its troops take such action? Conclusions from here are terrifying. That may just have been the military objective on Thursday night -- a willingness to take shockingly reckless or shockingly calculated steps in order to send an awful message.
Diplomatically Speaking...
This all went down just after a second round of peace talks between Ukrainian and Russian officials took place in the Bialowieza Forest, which is known as the site where in 1991 Ukraine, Belarus and Russia signed the treaty that formally dissolved the Soviet Union. This time, all they agreed to was the creation of a humanitarian corridor from besieged areas, providing an escape route for non-combatants. Russia demands the demilitarization of Ukraine. Obviously, with enemy forces taking Ukrainian land by force, that is not agreeable to the Ukrainian side. The two sides have agreed to meet again.
Elsewhere, the UN voted 141-5 in favor of a measure urging Russia to immediately cease this aggression, with 35 abstentions including China. In case you were wondering, the four members of the UN who sided with Russia's invasion are Belarus, Syria, North Korea and Eritrea. Rule of thumb here: Just in case you weren't sure if you were the bad guys, and then you realize that these are your friends... Well, now you know.
The European Union sought to remove Russia's "most favored nation" status at the World Trade Organization, while in the US the Biden administration moved to sanction eight wealthy Russian oligarchs and their families. What the Biden administration is resisting for some bizarre reason are the calls to ban Russian oil imports into the US despite bipartisan calls to do just that from legislators, as well as support to do so from "The American Fuel and Petrochemical Manufacturers," which happens to be the largest oil refining lobby in the US.
Militarily Speaking....
Soviet forces appear to have taken and held the southern Ukrainian city of Kherson, which is a strategic location on the Dnipro delta. The Russian army seems to be having far more success in the south of the country than in the north, where the Russian army has met stiff resistance and large military convoys appear unable to move forward, as well as in the east, where pro-Russian separatists were thought to be far stronger than what has turned out to be reality.
Bear in mind that according to the Pentagon, Russia has now deployed more than 90% of the forces that had been staged around Ukraine prior to the invasion. There does not seem to have been any reinforcement from other parts of Russia as replacements for those troops already deployed. Also bear in mind that the Russian Navy had deployed 10 amphibious assault ships to the Black Sea ahead of this war, but to date have only tried one minor landing of what they call Naval Infantry (We call them Marines) near Odessa. This untapped source is still left, for now, off of the chessboard. One would think Russia would be waiting to make another, more serious attempt at taking that crucial and strategic city from a natural resources perspective.
Elsewhere, Ukrainian officials and Russian media are reporting that Russian Major General Andrei Sukhovetsky, the commanding officer of Russia's Seventh Airborne Division, had been killed in action by Ukrainian forces. This could (opinion) be a contributory factor in Russia's lack of progress in some parts of the country. Russian military doctrine, unlike US military doctrine, is to stop in place and wait for instructions upon the loss of leadership. That is contrary to US military doctrine where the next person up automatically takes command and carries on with the mission.
On That Note...
S&P Global Ratings apparently has cut Russia's credit rating for the second time in a week, after cutting Russia from investment grade to "junk" status late last week. That reduction was then followed by fellow ratings agencies Moody's and Fitch this week. On Thursday, S&P reduced Russia yet again, to triple-C minus, which is as low as a nation can go without being considered to be in outright default.
Hey, It's Jobs Day
If ever there was a month where the Bureau of Labor Statistics employment surveys had been pushed down to the level of afterthought, this is that month. Fact is, this morning's February jobs data, next Thursday's February Consumer Price Index report and the February Retail Sales slated for the morning of March 16 are the final major macroeconomic data points that the Federal Open Market Committee (FOMC) will have to take under consideration ahead of their policy statement set for the afternoon of March 16. Interestingly, though most economists do expect rather strong job creation for February, the employment component of both the ISM Manufacturing and Non-manufacturing surveys disappointed, with employment for the services survey printing in a state of outright contraction.
US markets behaved in mostly negative fashion on Thursday. Crude peaked early and then sold off as German Economy Minister Robert Habeck voiced opposition to a Russian oil embargo, though Russian oil is having trouble finding buyers. Beyond commodities, US Treasuries mostly moved sideways, at least until the Russian army decided to attack a nuclear power plant, and equities faced downward pressure.
Nearly all major large- to small-cap indexes shaded red for the session, with the Nasdaq Composite (-1.56%) leading the way lower followed by the Nasdaq 100 and the Russell 2000. The S&P 500 gave up 0.53%, even though seven of the 11 S&P sector SPDR ETFs had shaded green for the day. The four defensive sectors took the top four spots on the daily performance tables, led by the Utilities (XLU) and the REITs (XLRE) , which were the only two sector ETFs to gain more than 1% on Thursday. The two growth sectors took places nine and 10, as Consumer Discretionaries (XLY) finished in the basement on weakness across the automobile space as well as in travel and tourism names. Just an FYI, the Dow Jones US Software Index and Philadelphia Semiconductor Index both surrendered 2.2% on Thursday.
Breadth
Losers beat winners at the New York Stock Exchange by roughly 3 to 2 and at the Nasdaq by about 2 to 1. Advancing volume took a 37.4% share of the composite for NYSE-listed names and a 31.5% share of aggregate Nasdaq-listed trading. Aggregate trading volumes for both S&P 500 subordinate names and Nasdaq Composite listed names dwindled ahead of the employment data. This implies that for professional money, there was more of a risk-off move, for growth stocks in particular, ahead of a significant macroeconomic data release than it was a convicted move toward safety. Of course, that was also ahead of the Russian military taking action that can only be taken as an attempt to terrify (or provoke) the entire civilized world.
Failed Breakout?
Sarge holding Union Pacific Corp. (UNP) appeared to be breaking out of a four-month basing period of consolidation on Thursday...
..... only to give back almost all the day's gains by closing time. The shares are trading around $254 overnight, which is below the $256 pivot. I remain long this name. I have a $307 target price and a panic point of $245, which would require that both the 50-day simple moving average (SMA) and 21-day exponential moving average (EMA) crack.
Among the other rails, only Berkshire Hathaway (BRK.B) , which is a conglomerate and encompasses far more than just the BNSF (Burlington Northern Santa Fe) Railway, shows a current technical breakout attempt underway. I only trade the B stock.
Here I see an ascending triangle more than a basing pattern, with a $326 pivot. I am also long this one. I have a $391 target and a panic point of $311, which implies a break of the 50-day SMA.
February Employment Situation (08:30 ET)
Non-Farm Payrolls: Expecting 399K, Last 467K.
Unemployment Rate: Expecting 3.9%, Last 4.0%.
Underemployment Rate: Last 7.1%.
Participation Rate: Expecting 62.3%, Last 62.2%.
Average Hourly Earnings: Expecting 5.8% y/y, Last 5.7% y/y.
Average Weekly Hours: Expecting 34.6, Last 34.5 hours.
Other Economics (All Times Eastern)
13:00 - Baker Hughes Oil Rig Count (Weekly): Last 650.
The Fed (All Times Eastern)
08:45 - Speaker: Chicago Fed Pres. Charles Evans.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (HIBB) (1.22)
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