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The equity markets have fallen for the fourth straight week as the S&P 500 is down 9.5% from all-time highs. Comparatively, the NASDAQ and Dow Jones indices have declined by 17% and 8.9% respectively from record levels. Market analysts expect the markets to remain volatile in the next week due to the ongoing conflict between Russia and Ukraine as well as inflation numbers that will be published for February this Thursday.
Russia invaded Ukraine 10 days back, following which several countries part of NATO imposed multiple sanctions on the country. The S&P Dow Jones Indices also confirmed it will remove all stocks listed in Russia from its benchmarks and will declassify the country as an emerging market.
The New York Stock Exchange paused trading in three Russian ETFs or exchange-traded funds. Due to a sustained sell-off in Russian equity companies, the iShares MSCI Russia ETF (AMEX: ERUS) is down 81% in 2022.
Energy prices soar as inflation remains in focus
The Russian invasion of Ukraine has driven oil prices to multi-year highs. The U.S. Benchmark West Texas Intermediate crude rose by 7% to $115 per barrel while prices for the global standard Brent crude increased by 6% to $118.
Comparatively, government bond yields declined as investors reduced exposure to this asset class. The 1-year Treasury yield stood at 1.73% and the plunge in interest rates induced a sell-off in banking stocks.
Due to restrictions over air space and the threat of rising costs amid high oil prices, shares of travel companies such as United Airlines (NASDAQ: UAL), Delta Air Lines (NYSE: DAL), and American Airlines (NASDAQ: AAL) fell by 9%, 5.6%, and 7% respectively.
Comparatively, higher commodity prices allowed energy stocks to continue their momentum further in the last week.
Berkshire Hathaway discloses a $5 billion stake in Occidental Petroleum
During Berkshire Hathaway’s (NYSE: BRK.A)(NYSE: BRK.B) annual letter to shareholders, Warren Buffett claimed he could not find an exciting enough company to invest in at current prices. Instead, Berkshire focused on improving shareholder wealth by focusing on stock repurchases and buybacks.
However, an SEC filing on Friday disclosed Berkshire owned 91.2 million shares of Occidental Petroleum worth $5.1 billion. The stock surged by more than 17% on Friday, following this news. Shares of Occidental Petroleum have almost doubled in 2022, making it one of the top-performing stocks part of the S&P 500.
Occidental Petroleum (NYSE: OXY) recently reported a fourth consecutive record for quarterly free cash flow generation which allowed it to generate its highest-ever annual level of cash flows last year. It continues to strengthen the balance sheet and repaid around $2.2 billion of debt in Q4 of 2021.
While the company ended 2021 with a cash balance of $2.8 billion, it also repaid $6.7 billion of debt in the last year.
Inflation will remain the focus
While the economic calendar is relatively light for the upcoming week, investors will closely be watching the consumer price index for the month of February. Economists expect inflation to rise by 7.8% year over year compared to the 7.5% rise in January, which was already the highest since 1982. The consumer price index or CPI includes food and energy prices.
Investors are worried that rising inflation will result in reduced consumer spending as well as the possibility of multiple interest rate hikes. These factors will in turn lead to higher borrowing costs, tepid top-line growth, and a contraction in earnings for most enterprises.
Pfizer and Moderna expect to report $51 billion in vaccine sales in 2022
The world’s largest vaccine manufacturers Pfizer (NYSE: PFE) and Moderna (NASDAQ: MRNA) are expected to report $51 billion in combined vaccine sales in 2022. While Pfizer’s vaccine sales are expected to touch $32 billion, Moderna is forecast to report $19 billion in sales. These are minimum sales estimates and reflect the contracts already signed by the two companies.
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