Stocks rally after decent data with focus on Ukraine, bitcoin benefits from risk-on rally

US stocks rose as investors assess the impact of the latest round of sanctions against Russia, mostly impressive US data, and as oil prices edge lower. Wall Street knows that the US economy is still looking pretty good but they are trying to figure out how aggressive the Fed will be with tightening, how high oil prices will get, and will the war in Ukraine be over in a few months’ time. The S&P 500 is making another run for the 4,500 level, but the key one to watch is 4,541 which should provide significant resistance.  Too much geopolitical uncertainty and likely commodity price stress will cap this current stock market advance.

G-7 to increase sanctions

The G7 reached an agreement on coordinated sanctions against Russia that should have a crippling effect on their economy.  With over 400 individuals and entities now subject to sanctions, President Putin’s support for the war back home should be waning.  The key hit to the Russian economy would be an embargo on coal, oil, and gas, but that still seems like a card that won’t be played until Europe has made better protections to deal with that shortfall in energy.

The next phase of the war is circled with uncertainty as the Russians can emphasize cyber, or even worse, chemical and nuclear attacks. The Russian economy is heading towards a bad recession and that could prompt action that does not make this a long war.

US data

The labor market is still showing no signs of weakening after initial jobless claims fell to a 53-year low.  New applications for jobless benefits fell to 187,000, much better than the consensus estimate of 210,000 and upwardly revised prior reading of 215,000.  US durable goods orders dropped more than expected as supply chain issues returned and as passenger planes and autos posted a hefty decline.  Traders were somewhat expecting weakness for orders at factories given it has been all uphill since last year.  The core capital goods order reading fell 0.3%, which isn’t so bad given how well it has performed.  Business activity may soften a little bit more, but not many are expecting a complete deterioration in the space.

Bitcoin

A broad risk-on rally on Wall Street is also helping send Bitcoin higher to the upper boundaries of its recent USD 37,000 to USD 45,000 trading range.  Bitcoin did get a boost after a Russian lawmaker hinted that they could suggest bitcoin for oil payments. Using crypto to skirt sanctions however is not what the cryptoverse needs for long-term growth.  Bitcoin should still remain confined to its recent trading range until institutional traders decide to rotate out of stocks.

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