“It’s still a big factor,” David Coombs, head of multiasset investments at Rathbones, told me. “This is very relevant at the moment, and unfortunately it is very difficult to see how this will change.”
After a sharp summer rally, US stocks are only 2.3% lower than at the end of February. But the gloomy mood continues to influence investment decisions. What happens next in the conflict could also influence the Fed’s next moves, which remain a key factor in determining the market’s trajectory.
Shares of European companies, which were hardest hit by the war and the resulting energy crisis, fell almost 5%. They face a much bleaker prospect.
If the war ends, shares in European companies such as Germany’s Siemens could rise strongly, Coombs said. But he expressed little optimism on that front.
“There is no end in sight. There is no obvious rapprochement between the two countries,” he said. “At the moment, you kind of take into account that this war will continue until 2023.”
The long arm of the conflict hangs not only over the global stock market.
But Tracey Allen, ag commodities strategist at JPMorgan Chase, said difficult logistics are still limiting supplies from Ukraine and extreme weather could push prices up again in the coming months.
“The market really needs the volumes of grain coming from Ukraine, but it seems that without a ceasefire we will not have normalization of export flows,” she told me.
Energy prices. World oil prices jumped to $139 a barrel in early March, but fell on growing fears of a recession that could hit fuel demand. They have lost about 18% since the beginning of June.
Currencies. The euro fell to a two-decade low this week on fears that an energy-starved Europe could slip into a hard recession. Last month, it reached parity with the rising US dollar for the first time since 2002.
“Sustained rebound in most [major] currency against the US dollar at this stage seems unlikely to us,” ING strategists said in a note this week.
Whistleblower Twitter tweet gets Washington’s attention
In a nearly 200-page disclosure sent last month to US lawmakers and regulators, reported exclusively by CNN Business and the Washington Post on Tuesday, Zatko argues that Twitter has serious security problems.
These issues, he says, pose a threat to users’ personal information, company shareholders, national security, and democracy.
“If true, these claims could reflect dangerous privacy and data security risks for Twitter users around the world,” Senator Dick Durbin, chairman of the Senate Judiciary Committee, said on Twitter. “I will continue to investigate this matter and take further steps as necessary to sort out these troubling allegations.”
Remember: Bots are central to Musk’s argument that he should be able to opt out of buying Twitter. He stated that the company can significantly underestimate the number of spam and fake accounts. Twitter said it was just a front for buyer remorse amid the downturn in the market.
Zatko’s complaint could strengthen Musk’s position. Zatko argues that Twitter has neither the incentive nor the resources to measure the total number of bots on its platform, and that the company has made “material misstatements and omissions” for years on security and privacy issues.
This discount chain is suffering as shoppers back off
As shoppers spend more on food and energy, they are spending less on new clothes and essentials — and even discount chains are losing money.
“Uncertainty going forward is significant,” CEO Eric Nordström told analysts, noting that the drop was most pronounced among Nordstrom Rack’s lowest-income customers.
My thoughts: Stores like Nordstrom Rack are in dire straits. Shoppers less affected by inflation are more likely to shop at a traditional Nordstrom or Bloomingdale’s store. And although Rack offers big discounts, many items are still not cheap. This leaves him in “no man’s land” retail as spending habits change.
Nordstrom knows this. But instead of stepping up efforts to attract low-income shoppers, the company plans to make Rack a little more luxurious by adding premium items to its shelves.
“We’re moving away from lower-priced products that didn’t resonate with Rack customers,” said Nordström. “We believe that increasing the penetration of leading brands in Rack will make our offering more diverse.”
Petco reports results before US markets open. Following the closure are Nvidia, Salesforce, Snowflake and Victoria’s Secret.
Also today: Durable goods orders for July will arrive at 8:30 AM ET.
Tomorrow: The first estimate of US GDP for the April-June period showed a 0.9% year-on-year contraction in output. Economists expect this figure to be revised to 0.8% on Thursday.