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Daily Update: February 8, 2022


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Daily Update: February 8, 2022

Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy.

Following January’s equity market volatility, investors may be cautiously changing their bearish attitudes as the benchmark S&P 500 index rebounds—and preparing for additional market swings ahead.

After ending 2021 up 26.9% for the year, the S&P 500 fell 9.8%—and briefly into correction territory—over the three weeks from Jan. 3-Jan. 27, before rallying 4.4% over the final three trading days of the month. The CBOE Volatility Index, known colloquially as the VIX and considered Wall Street’s fear gauge, surged near 32 at a level not seen since the global pandemic shocked markets in March 2020. Now, the S&P 500 extended gains over the first two weeks of February. Now, analysts may be bracing for a volatile 2022, according to S&P Global Market Intelligence. 

"I think we're overdue for some regular volatility," Ryan Detrick, chief market strategist at the investment and wealth management firm LPL Financial, told S&P Global Market Intelligence. “It feels shocking to investors because we’ve been so spoiled for almost two years now.”

Major equity market moves in recent weeks have reflected investors’ reactions to the U.S. Federal Reserve’s forthcoming interest rate increases to combat inflation, alongside a flurry of activity surrounding earnings releases from major technology companies. External factors, like the passage of federal aid packages, could boost the performance of certain stocks. Other stocks have been seemingly protected from the market pandemonium. The S&P U.S. BMI Banks index rallied 1.4% last month as the S&P 500 posted its negative total return, according to S&P Global Market Intelligence. 

“Disparate corporate earnings, in particular those of Meta and Amazon, were among the main drivers of a riotous increase in single-day S&P 500 stock dispersion in February,” Benedek Vörös, director of index investment strategy at S&P Dow Jones Indices, said in a note yesterday. “The weighted standard deviation among single S&P 500 constituent daily returns shot up to 65% annualized last Thursday, the highest single-day reading since the market processed the dual news of Pfizer’s COVID-19 vaccine and the results of the U.S. presidential election on November 9, 2020.” 

“In another topsy-turvy day of trading, the S&P 500 gave back its early-day gains in the final hour of trading and finished yesterday with a decline of 0.4%, weighed down by a 2% drop in Communication Services,” Vörös said in a note this morning. “Sectors continue to be a dominant driver of performance in equities, worldwide. So far in February, soaring oil prices and rising yields have lifted Energy and Financials lifted around the globe, while Information Technology and Real Estate have been the laggards.” 

This unpredictability hasn’t been confined to the equity market. Overall, institutional securities firms’ market risk is likely to increase from elevated market volatility, which increases the potential for mark-to-market losses and other risks and could lower risk-adjusted capital, according to S&P Global Ratings. Treasury yields are also nearing a curve inversion—raising questions over the reliability of the yield curve as an indicator of recession risk.

"There is an incredible amount of uncertainty about where rates are going in the future and we're still in the early days of the rate hiking cycle," Gennadiy Goldberg, a senior rates strategist at the investment bank TD Securities, told S&P Global Market Intelligence of how ongoing market volatility and the potential for new pandemic-related disruptions make it difficult to predict the forthcoming interest rate cycle. "Markets could still very much reprice."

S&P Global Economics now expects the U.S. central bank to enact six interest rate hikes this year, followed by an additional five in 2023-2024.

Today is Tuesday, February 8, 2022, and here is today’s essential intelligence.


U.S. Hiring Shatters Expectations With Millions Of Americans Too Sick To Work

U.S. job creation in January was far stronger than nearly all analysts forecast, even with the omicron variant keeping a record number of Americans home sick. About 467,000 jobs were added in January, according to the U.S. Bureau of Labor Statistics monthly jobs report, released Feb. 4. This was well above expectations, many of which were predicting job losses for the month. The bureau also revised upward two previous monthly reports, increasing November and December's job gains by a combined 709,000.

—Read the full article from S&P Global Market Intelligence

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Capital Markets

Listen: The Upgrade Episode 18: Lender Recovery Study Update

The latest episode of The Upgrade podcast discusses lender recoveries during the 2020 and 2021 default cycle, as well as key highlights from S&P Global Ratings’ recently published article “Recovering From COVID-19: Why The Timing Of Bankruptcy and Emergence Matters For Debt Recovery.”

—Listen and subscribe to The Upgrade, a podcast from S&P Global Ratings

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Global Trade

Iran Deal With Oil Sanctions Relief Not A Sure Bet Despite Latest U.S. Waiver: Analysts

The U.S.-Iran talks remain far from certain to reach a deal for restarting nuclear controls and removing major oil sanctions, despite the recent U.S. move to grant some sanctions relief to Tehran's civil nuclear program, analysts said. The negotiations have been the top oil supply risk for 2022, with an interim deal potentially increasing exports by 700,000 b/d while a breakdown in talks could spike geopolitical tensions and global oil prices, according to S&P Global Platts Analytics.

—Read the full article from S&P Global Platts

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Global Sustainable Bond Issuance To Surpass $1.5 Trillion In 2022

S&P Global Ratings expects global issuance of sustainable bonds—including green, social, sustainability, and sustainability-linked bonds—will surpass $1.5 trillion in 2022. It believes sustainability-linked bonds will be the fastest-growing segment of the market. Green bonds will also see record issuance volumes in 2022, maintaining their position as the dominant sustainable bond category. Finally, S&P Global Ratings expects continued growth of social and sustainability bonds as they diversify into new projects in support of the 2030 SDG agenda. Growth in these markets will be a result of significant investor demand, regulatory developments to help standardize the market, and issuers' desire to diversify their investor base and potentially obtain favorable pricing terms.

—Read the full report from S&P Global Ratings

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Energy & Commodities

Asia Refiners Unfazed By U.S.-Moscow Tensions, See Plenty Of Alternatives For Russian Crude

Asian refiners are broadly unfazed by the escalating tensions between Washington and Moscow as the companies do not expect any severe disruption to Russian crude trades in the region, while Russian oil makes up only a small portion of many Asian countries' refinery feedstock import baskets with many alternatives seen available. Far East Russian crude grades including ESPO Blend, Sokol, and Sakhalin blend are actively traded in the Asian spot market and the cargoes are changing hands without any disruptions so far, according to feedstock managers and crude traders at major Thai, South Korean, Chinese, and Japanese refiners.

—Read the full article from S&P Global Platts

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Technology & Media

Global Internet Outages Decrease 3%, U.S. Disruptions Up 3% In End-January

Global internet outages dipped 3% to 266 in the week of Jan. 29, ending a three-week upward trend that started in the second week of January, according to data from ThousandEyes, a network-monitoring service owned by Cisco Systems Inc. U.S. outages, meanwhile, slightly increased 3% to 118 from 115 in the previous week. The recent total comprised 44% of all global disruptions, compared to 42% in the week of Jan. 22.

—Read the full article from S&P Global Market Intelligence

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Written by Molly Mintz.