U.S. stocks are lower, after brief forays into positive territory sputtered, on uncertainty about the potential impact of increasing sanctions against Russia for its invasion of Ukraine. Oil and grains were higher while natural gas futures fell and the ruble plummeted.
The VIX Volatility Index, which seeks to measure fear and uncertainty in the market, jumped as hopes of a ceasefire are shrinking.
- U.S. stocks are lower, after brief forays into positive territory sputtered, on uncertainty about the potential impact of increasing sanctions against Russia for its invasion of Ukraine.
- Oil and grains were higher while natural gas futures fell and the ruble plummeted.
- The Nasdaq and S&P 500 were momentarily higher.
Shares of banks are slumping as measured by the S&P 500 Financials Sector Index as the U.S. and its allies apply more tough restrictions on Russia’s financial system (more below). Investors are pouring money into U.S. bonds, with the price of the 10-year Treasury note rising and the yield falling 10 basis points (BPS) to 1.87%.
Oil futures are up 3.5% on concerns sanctions will limit Russian supplies. BP Plc announced it was exiting its $14 billion agreement with Russian oil giant Rosneft Oil Co. Shares of BP (BP) are down 5%. However, shares of Occidental Petroleum Corp. (OXY) and other oil companies are gaining.
Shares of alternative energy providers as well as Tesla Inc. (TSLA) are among the best-performing stocks in the S&P 500. Shares of Delta Air Lines Inc. (DAL) and other airlines are falling on expectations of higher fuel prices and as restrictions on flights tied to the sanctions limit European travel.
Defense Contractor Shares Up
Russia—Ukraine and Cryptocurrencies
Major cryptocurrencies are trading higher. The price of Bitcoin is above $41,000, up nearly 10% in the past 24 hours. Last week, some commentators noted that Russia may use cryptocurrencies to skirt economic sanctions. Trading volumes in Bitcoin using the ruble are at their highest levels since May 2021. Over $22 million in cryptocurrencies has been donated to Ukraine recently, with crypto exchange Binance donating $10 million to the cause.
Quick Hits: Editor’s Picks
Chart of the Day: Ruble Rout
The ruble is plunging against the dollar, and Russia’s central bank more than doubled its key interest rate as the U.S. and its allies ratcheted up financial sanctions against Moscow over the invasion of Ukraine.
The Russian currency is losing more than a quarter of its value and is now worth less than a cent after Western nations moved over the weekend to block some Russian banks from participating in the SWIFT financial transaction system. Today, the Biden administration announced new restrictions on dealings with the country’s central bank.
The Bank of Russia lifted interest rates from 9.5% to 20%, the highest in almost two decades. It said it needed to take the step to protect Russians from the risk of rising inflation and the depreciation in the ruble caused by the sanctions. The bank also introduced some capital controls to help prevent a run on banks and stock market selloff. Trading was suspended today on the Russian equities market.
Ordering Companies to Help
Governor Elvira Nabiullina, who heads the Bank of Russia, added the sanctions have limited the country’s ability to use its gold and foreign exchange reserves. The bank and finance ministry said they are ordering exporting companies to sell 80% of their own foreign exchange reserves to help prop up the currency.
Stock of the Day: Renewable Energy Group (REGI)
Chevron said the agreement values Renewable Energy Group (REG) shares at $61.50 each. That’s about a 43% premium from their closing price Friday.
The energy giant explained the purchase will help accelerate progress towards its goal of increasing its renewable fuels production capacity to 100,000 barrels per day by 2030. In addition, Chevron said the addition of REG will expand its feedstock supplies and pre-treatment facilities.
More Sustainable Fuels
REG CEO Cynthia (CJ) Warner indicated the combination “gives us additional resources as we aim to accelerate growth and strengthen our collective ability to deliver the sustainable fuels our customers and the world need.” Warner is expected to join Chevron’s board.
Chevron anticipates the deal will close in the second half of this year, and after that happens it will base its Renewable Fuels business in REG’s home city of Ames, Iowa.
Renewable Energy Group shares are up 39%. Shares of Chevron are 2% higher.