The S&P 500 (SPX) started Friday broadly higher on sketchy news that Russian political leaders were hinting at a diplomatic solution to the war in Ukraine, states Jon Markman, editor of Strategic Advantage.
The rally was short-lived. Normal bear market angst emerged, sending the benchmark S&P 500 down to 4,204, a loss of 1.3%.
The rotation out of defensive stock groups continued during the session, which is odd. In contrast, cyclical stocks found persistent bids. It is difficult to trade news-driven stock markets, yet the weight of evidence suggests a kickback rally to relieve the oversold condition is probably in the wings.
Bulls will face significant resistance for the index at 4,330 and 4,460. There is no chance for a lasting rally until they take out the second level.
Critical support remains at 4,115, the Feb 24 intraday low that was set on the day Russia invaded Ukraine.
The Upshot
The Nasdaq (IXIC) fell 2.2% on Friday to 12,843.81 for a weekly loss of 3.5%, and the Dow (DIJ) slipped 0.7% to 32,944.19, finishing 2% lower for the week. Communication services was the biggest decliner, with all sectors in the red.
Breadth favored decliners three-one and there were 786 new lows vs 114 new highs. Big caps on the new high list included Berkshire Hathaway ( BRK-A), Anthem, Inc (ANTM), HCA Healthcare (HCA), and Sempra (SRE).
The 10-year US Treasury Yield (TNX) was little changed at 2%. West Texas Intermediate Crude Oil (CL=F) rose 3.2% to $109.40 a barrel. Gold (GL=F) for April delivery fell 0.6% to $1,989.20 per troy ounce, and Silver (SL=F) was down 0.4% to $26.17 an ounce.
Among several new punishments imposed on Russia were the planned revocation of its "most-favored nation" trade benefits as well as a ban on imports of Russian vodka, diamonds, and seafood. The US government plans to impose the new sanctions along with G7 countries as well as the European Union. Biden said the move is to hold Russian President Vladimir Putin "even more accountable" for the aggression against Ukraine and to "further isolate Russia on the global stage."
The announcement followed media reports in which Putin claimed progress in talks with Ukraine. Nevertheless, the invasion intensified.
In economic news, the Michigan consumer sentiment index fell to 59.7 in early March from 62.8 in February, the lowest level since 2011, with the assessment of current economic conditions down slightly and the outlook significantly amid rising inflation expectations. "Consumer sentiment continued to decline due to falling inflation-adjusted incomes, recently accelerated by rising fuel prices as a result of the Russian invasion of Ukraine," the survey's economist said.
In company news, Wedbush said in a note to clients DocuSign (DOCU) will likely see a continued decline in sales growth after its fiscal first quarter and fiscal 2023 outlooks trailed expectations. Shares of the online document sharing software provider plunged 21%. Don’t sign here.
Etsy (ETSY) was the biggest decliner on the S&P 500 with a loss of nearly 12% after Deutsche Bank started its coverage at hold. This is a wonderful and unique retailer, but the price is too high for this stage of the game.
