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Governments and private businesses alike continued to put more distance between themselves and Russia, sending commodities higher but triggering a slump in equities that sent the tech-heavy Nasdaq Composite into a bear market.
Oil soared on Monday as both Congress and the White House reportedly were in favor of moving ahead with banning Russian oil, even if Europe fails to implement similar measures. U.S. crude oil futures jumped 3.2% to a 13-year-high settlement of $119.40 per barrel.
Gold futures, meanwhile, enjoyed their highest finish since August 2020, climbing 1.5% to settle at $1,995.90 per ounce after trading above $2,000 intraday.
Also, over the weekend, Adobe (ADBE), Netflix (NFLX), PayPal (PYPL) and others joined a growing list of companies at least partially shutting down operations in Russia. U.S. equities continued to feel the weight of these moves, however. The financial (-3.6%) and consumer discretionary (-4.9%) sectors suffered the deepest losses in a bright-red day for the broader markets.
The Nasdaq was worst off among the major indexes with a 3.6% decline to 12,830 that put it into bear-market territory, off more than 20% from its Nov. 19 high. The S&P 500 (-3.0% to 4,201) and the Dow Jones Industrial Average (-2.4% to 32,817) also finished well in the red.
"The S&P 500 posted the worst day since October 2020," says Cliff Hodge, chief investment officer for financial planner Cornerstone Wealth. "Fear is palpable. There seems to be no evidence of improvements in Ukraine, and the rhetoric out of D.C. continues to get more hawkish.
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"While it’s impossible to know where the ultimate bottom may be, from a risk-reward standpoint, the market looks very reasonable. We’re using weakness to add exposure as we continue to see very little chance of recession over our forecast horizon."
YCharts
Other news in the stock market today:
We're increasingly hearing the "S" word being thrown around Wall Street. Stagflation, that is.
Yes, the unemployment rate has recovered to near pre-pandemic lows, but the other two hallmarks – red-hot inflation and slowing economic growth – are certainly at the front door. Several economists have been lowering their U.S. GDP estimates of late, including LPL Financial Chief Economist Jeffrey Roach.
"We currently expect the U.S. economy to grow 3.7% in 2022," he says, down from 4% to 4.5% in LPL's 2022 outlook. (Kiplinger currently forecasts 4.0%.)
"The risks are to the downside since the Fed may err on tightening too fast, the recent commodity spike may trickle down to the U.S. consumer, and supply-and-demand imbalances may last longer than expected."
Commodities are considered to be among the best defenses against potential stagflation, and you can access them in a number of ways. Exchange-traded funds, such as these 14 ETFs, allow you to invest in baskets of commodity stocks, futures and sometimes the physical goods themselves.
But those wanting a more concentrated bet might consider individual stock picks. From energy producers to miners, these five "stagflation stocks" represent a short list of commodity-tethered plays that should provide protection should the economy continue to cool while inflation keeps heating up.
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