Stocks Finish Lower in Run-Up to Key Jobs Report: Markets Wrap

(Bloomberg) -- Technology stocks dragged down the equity market ahead of Friday's jobs report as traders weighed the economic impacts of the war in Ukraine. The rally in oil stalled, with crude experiencing an extraordinary run of volatility.

Equities struggled to find direction throughout most of the session, with the S&P 500 pushing lower into the close amid a selloff in megacaps like Tesla Inc. and Amazon.com Inc. West Texas Intermediate crude topped $116 before pulling back. Zinc reached its highest since 2007 and aluminum jumped to a record as industrial metals extended a surge fueled by trade turmoil and the increasing economic isolation of Russia.

Read: U.S. Inflation Set for Even Hotter 2022 Due to War's Impact

Traders awaited the government's employment report, which is currently forecast to show the U.S. added 423,000 jobs in February. Along with soaring commodity prices since Russia's invasion of Ukraine, high labor costs are yet another factor the Federal Reserve has to contend with. Fed Chair Jerome Powell noted that the surge in energy prices will likely spill into inflation, and if that shift proved to be lasting, it could put upward pressure at the “margin” to longer-term expectations.

President Joe Biden's administration said it would sanction eight wealthy Russians and their families and impose visa restrictions on 19 others and 47 of their family, as the U.S. and its allies seek to raise pressure on the elites around President Vladimir Putin in response to the invasion of Ukraine. The White House's objections to banning oil imports from Russia puts it at odds with a bipartisan clamor to punish Moscow despite the inevitable pain it would cause by soaring gasoline prices.

Comments:

• “Rising commodity prices are a big concern for the market, prompting fears of stagflation,” said Fiona Cincotta, senior financial markets analyst at City Index. “The economic clinch point of this war is commodity prices. Higher energy prices, slowing growth, and surging inflation are not a good outlook.”
• “There has been a lot of daily volatility, which I don't expect to subside,” said Megan Horneman, chief investment officer at Verdence Capital Advisors. “Even if volatility will remain heightened, we are not worried for a recession. I believe there will be a growth slowdown, specifically because of heightened global commodity prices.”
• “Volatility is going to continue to be around and an issue,” said Mark Stoeckle, chief executive officer of Adams Funds. “We are positioned for oil to go higher. There's no question that this is going to be a headwind.”
• “Policy makers are facing an unenviable situation over the near-term; inflationary pressures are mounting while the broader outlook grows more uncertain by the day,” wrote Deutsche Bank strategist Jim Reid.

Investors dumped risk assets during Russia's invasion of Ukraine but they found a haven in junk. U.S. high-yield corporate bonds rallied over the last week, thrashing investment-grade, which is much more susceptible to rising rates. Strategists expect the debt to continue to do well, even as higher-rated bonds sell off.

Read: Funding Stress Indicator Surges to Widest Levels Since May 2020

What to watch this week:

• U.S. unemployment, nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.5% as of 4 p.m. New York time
• The Nasdaq 100 fell 1.5%
• The Dow Jones Industrial Average fell 0.3%
• The MSCI World index fell 0.6%

Currencies

• The Bloomberg Dollar Spot Index rose 0.3%
• The euro fell 0.5% to $1.1065
• The British pound fell 0.5% to $1.3345
• The Japanese yen was little changed at 115.44 per dollar

Bonds

• The yield on 10-year Treasuries declined two basis points to 1.85%
• Germany's 10-year yield was little changed at 0.02%
• Britain's 10-year yield advanced four basis points to 1.30%

Commodities

• West Texas Intermediate crude fell 1.9% to $108.48 a barrel
• Gold futures rose 1% to $1,940.80 an ounce

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