Stocks were lower last week as the Russian war in Ukraine intensified. European stocks were hit especially hard, sending MSCI’s EAFE developed market international index down 6.5% on the week. In the US, investors scrambled to increase their exposure to energy stocks and defensive sectors, while selling tech and most cyclicals besides energy.

Bond markets reflected the sharp increase in risk aversion, with Treasury yields falling across the curve while credit spreads widened. The belly of the curve saw the most dramatic move, with 10y yields falling 23bp on the week, 2y yields finishing lower by 9bp, and 30y yields falling 11bp. Meanwhile, investment grade credit spreads moved wider by 9bp to reach 122bp, while high yields spreads were 23bp wider on the week, finishing at 376bp. See the Chart of the Day for a time series of credit spreads.

Commodity prices moved sharply higher last week. WTI finished above $115/barrel for the first time since September of 2008 (oil spiked briefly in the immediate aftermath of “Lehman weekend”), while the S&P GSCI Non-Energy Commodity Index closed at a new all-time high on Friday.
In economic news, nonfarm payrolls (+678k) significantly exceeded consensus expectations, while the unemployment rate fell to 3.8%. In a sign that inflation pressures may be abating slightly (at least prior to any economic fallout from the war in Ukraine), average hourly earnings were flat sequentially in February and fell to +5.1% y/y.