JJ Kinahan, Chief Market Strategist, TD Ameritrade

(Thursday Market Open) Last night Russia continued its invasion of Ukraine by attacking several cities and airports with missile strikes. Oil futures soared overnight with Crude WTI up 8% and trading just below $100 a barrel. Brent futures climbed 7.8% to $101.50. Natural Gas Futures Contracts also jumped 6.31%. Rising oil prices and the escalation by Russia have stock index futures pointing to a much lower open.

Nasdaq Futures Contracts were the most down before the opening bell at 3.21%, followed by the S&P 500 Futures Contracts at 2.51% and Dow Jones Industrial Futures at 2.38%. If the sale continues, the Nasdaq Compound ($COMP) will likely be in bearish territory as it hits 20% below its November high. the Cboe Market Volatility Index (VIX) jumped more than 20% to 37.38, reflecting growing fear and uncertainty around the invasion.

Asian markets closed sharply lower on the news with Hong Kong Hang Seng decrease of 3.2%, the South Korea Kospi down 2.6%, and the Japanese Nikkei down 1.8%. European markets are also affected as STOXX Europe 600 fell 3.8%, the German DAX fell 5.1%, and the French CAC 40 decreased by 4.5%.

Investors are looking for safe havens with gold futures climbing more than 3% overnight and the 10-year Treasury yield (TNX) down 5.41% as investors buy Treasuries and push bond prices higher. Forex traders pile into the dollar, pushing the US dollar index up more than 1%.

The Russian occupation of Ukraine, along with warnings from the US State Department that Russia is poised to take control of the entire country, pushed stocks lower again on Wednesday. the S&P500 (SPX) broke an important support level by trading below 4300. This level took place in January 2022 and October and July 2021. Depending on which technical analyst you speak to, the next level of support could be between 4050 and 4000.

the Russian MOEX the stock index was down 34% this morning in response to the attack. On Monday, the MOEX was down 20%. Russian ADR Mobile telesystems (MBT) fell 8.79% on Wednesday. Other commodities where Russia is a major player are also on the rise. Palladium futures climbed 10% overnight, adding to yesterday’s gains of 3.70%. Russia is the largest producer of palladium. Russia is also an important player in nickeland those futures were up more than 5% before the bell, adding to its 1% rise on Wednesday.

The problems may not be unique to Russian companies. President Joe Biden has announced new sanctions against a Swiss-based company Nord Stream 2 SAwhich built the Russian Nord Stream 2 gas pipeline. If the United States and its allies are prepared to specifically target Russian companies, Russian stocks are likely to struggle.

the Dow Jones Industrial Average ($DJI) also broke support but is trading just below its June 2021 low. However, the average will likely be weighed down by the S&P 500 if it continues to fall on Thursday. the Nasdaq Compound ($COMP) is testing its May 2021 low and moving into a zone of congestion between the 13,000 and 12,000 levels. While value stocks have held up better than growth stocks, S&P 500 Pure Value Index further down by more than 1%. the S&P 500 Pure Growth Index fell 2.56%. The energy sector was the only sector to end the day positive. Consumer discretionary and technology were the worst performing sectors on the day.

Benefits from a new angle

This morning there are some interesting earnings announcements that may have a bad market reaction based on the Russian invasion more than actual results. For example, tech stocks are likely to take a hit as investors continue to shy away from growth stocks and favor safer havens. NetEase (NTES) is down 33.4% in premarket trading despite higher and lower numbers. NTES is one of the leading internet and online game providers in China. It has been hit hard by the Chinese government’s crackdown because it believes its citizens spend too much time playing video games.

However, commodity companies like Newmont (NEM), which is a leading gold producer, may find greater strength under current conditions. NEM is up 2.56% in premarket trading after beating earnings and revenue and with rising gold prices.

The move to safe havens could benefit consumer staples companies, as they tend to be more defensive. Anheuser-Busch (BUD) beat on earnings and revenue, but Keurig Dr Chilli (KDP) missed earnings despite higher revenue estimates. So far, neither company seems to be getting a boost. BUD is down 4.95% before the bell, while KDP is down 2%.

After closing on Wednesday, eBay (EBAY) reported earnings in line with earnings estimates, but offered a more cautious earnings outlook that missed analysts’ expectations. The stock fell more than 9% in extended trading hours.

Reservation of credits (BKNG) rose 2.84% in after-hours trading on better-than-expected earnings and revenue. The company also offered a more positive outlook saying it is seeing a “significant improvement” in travel trends as Omicron cases continue to decline. However, the Russian invasion appears to be prompting investors to consider other travel risks, as the stock fell 7.3% in premarket stock.

Stay with the travel group, Hertz Worldwide (HTZ) announced a new record profit. This allowed HTZ to beat earnings estimates, but fell short of revenue. The loss of revenue sent the stock down about 4% in after-hours trading. Many investors are worried about the future of all car rental companies. Due to the shortage of new cars during the pandemic over the past two years, car rental companies have been unable to replace their vehicles. This means that a huge amount of expense is in the future for these companies.

Although people may not travel as much, they don’t seem afraid to go to the movies. IMAX (IMAX) reported better-than-expected results on the top and bottom numbers. The stock rebounded 7.8% after the bell, but pared its morning gains, with shares trading 2.67% higher before the opening bell.

To sleep : The positive announcement of the results of Reservations (BKNG) may help travel and leisure stocks on Thursday, but the group faces a tough climb after the Dow Jones US Travel and Leisure Index fell nearly 3% on Wednesday. That said, the sector has started to show relative strength against the S&P 500 and appears to be led by the hotel group.

the Dow Jones US Hotel Index does not seem to have suffered the same problems as the air group with COVID-19 and its variants. In reality, Marriott International (MAR) handily beat earnings and revenue estimates last week, helping the stock hit a new all-time high. Unfortunately, large hotel chains, especially those with high international exposure like Marriott, are likely to be hit today due to geopolitical risks.

Fall from the sky: It almost goes without saying that airlines also underperformed the S&P 500. Fewer travelers weren’t their biggest problems with Omicron; they were hit hard by workers falling ill. Airlines have had to cancel flights due to a lack of pilots, attendants, mechanics, baggage handlers, flight attendants, and more.

That said, the AMEX Airline Index has gained relative strength against the S&P 500, but it will likely experience further problems with rising fuel prices caused by higher oil prices due to the Russian invasion of Ukraine. Airlines seem to be emerging from one turbulence pocket and into another.

good trade,

not a word

@TDAJJKinahan

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