The stock market scored an amazing comeback this week, initially selling off on the deteriorating Russia-Ukraine situation, then rallying on optimism that the conflict could have only a minimal impact on the U.S. economy. The S&P 500 closed the week with a 0.8% gain after falling as much as 5.5%, the Nasdaq Composite increased 1.1% after plunging as much as 7%, the Dow Jones nearly broke even after losing 5.3% midweek, and U.S. West Texas crude oil pulled back after briefly topping $100 per barrel. The turnaround came after President Biden issued targeted sanctions Thursday afternoon that did not affect Russia's oil and gas exports or block Russia's access to the SWIFT financial system, sparking the rebound that continued into Friday. At the same time, the shock and uncertainty of a war in Europe could discourage the Federal Reserve from being aggressive about hiking interest rates, which had been weighing on stocks before Russia's invasion.
Top news last week:
- Defense contractor stocks rally in wake of Russia's invasion of Ukraine: The Russia-Ukraine conflict has captured the eyes of the world, including those of investors. Some risk-bearing investors are piling into defense industry stocks, taking a bet that governments will increase Defense and security spending. Defense stocks Lockheed Martin (LMT) and Northrop Grumman (NOC) rose Friday by up to 4% both. The iShares U.S. Aerospace & Defense ETF (ITA) rose 3%. This sector might see even more interest from investors as Germany Chancellor Olaf Scholz announced a plan to beef up the German military on Sunday, pledging €100 billion ($112.7 billion) of the 2022 budget for the armed forces, and repeating his promise to reach the 2% of GDP spending on defense in line with NATO demands.
- Renewable energy Stocks Surge: In a sea of stock market losses amid Russia’s invasion of Ukraine, renewables are outperforming as power prices jump and investors mull the rising need for energy alternatives. The European Renewable Energy Index surged as much as 9.3% on Thursday, the biggest jump since the pandemic lows of March 2020, posing a stark contrast to the European market’s collapse. “Faster diversification away from Russian oil and gas, more spending on renewables plus nuclear power and on hydrogen for storage of energy,” are long-term impact from the Russia-Ukraine crisis, according to Berenberg’s chief economist Holger Schmieding. Solar specialist Sunrun (RUN) has gained 23% during last 2 days of the week, Sunnova Energy International (NOVA), Sunlight Financial (SUNL) and NextEra Energy (NEE) are up as well. Cheniere Energy (LNG), one of the largest liquefied natural gas producer company headquartered in Houston, gained more than 11% throughout the weak. Meanwhile, iShares Global Clean Energy ETF (ICLN) is up 5.54% during the week.
- Cybersecurity stocks rise on cyber-attack fears: Amid the rising anxiety of an escalation in the conflict, shares of the following cybersecurity companies jumped: Telos, up more than 20%; Palo Alto Networks, up 13%; CrowdStrike, up 13%; and Mandiant up 12%. Wedbush Securities analyst Dan Ives wrote in a note on Tuesday that concerns of cyberattacks could add 200 to 300 basis points of growth to the sector, which he said was already poised to increase 20% year-over-year in 2022. “Based on our conversations over the last 48 hours with enterprises/CISOs and contacts in the Beltway, there is a growing concern that massive cyber warfare could be on the near-term horizon which would certainly catalyze an increase in spending around preventing sophisticated Russian-based cyber-attacks going after datacenters, networks, vulnerability points, and other highly sensitive data,” Ives said in the note. According to Wedbush Securities, the core cyber security names most likely to benefit from this additional Ukraine-driven APT (advanced persistent threat) spending are Palo Alto Networks, Zscaler, Crowdstrike, Tenable, Varonis, Fortinet, Telos, Mandiant and CyberArk. iShares Cybersecurity and Tech ETF (IHAK) rose more than 9% Since Thursday.
Top S&P 500 sectors last week:
- Health care sector + 2.71% (ETF: XLV)
- Real estate sector + 2.7% (ETF: XLRE)
- Utilities sector - 2.04% (ETF: XLU)
Earnings:
Monday, February 28: HP (HPQ), Workday (WDAY) and Zoom Video (ZM).
Tuesday, March 1: Baidu (BIDU), Target (TGT), SoFi Technologies Inc. (SOFI), AMC Entertainment Holdings (AMC), salesforce.com (CRM), Plug Power Inc. (PLUG) and AutoZone (AZO).
Wednesday, March 2: Dollar Tree (DLTR), Paysafe (PSFE), Coupang (CPNG), Snowflake (SNOW), ChargePoint (CHPT), C3.ai Inc (AI) and American Eagle Outfitters (AEO).
Thursday, March 3: Kroger (KR), Best Buy (BBY), Costco (COST), Broadcom (AVGO), Marvell (MRVL) and Gap (GPS).
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