The focus shifts to Powell testimony and jobs report with the stock market's snapback.

• Despite a two-day rebound, markets may remain volatile due to the Ukraine crisis and its effects on global markets and energy prices.
• Jerome Powell, the Federal Reserve Chair, will testify before Congress twice next week, and his statements will be closely monitored for any indication of whether geopolitical events may influence rate hikes.
• The labor market is predicted to remain robust with the release of the February jobs report on Friday.

In the upcoming week, Jerome Powell, the Federal Reserve Chair, will testify before Congress, and markets will closely monitor his statements regarding the potential impact of the Russia-Ukraine conflict on Fed policy.

On Wednesday morning, Powell will testify before the House Committee on Financial Services about the economy, and then he will do the same before the Senate Banking Committee on Thursday. The crucial February employment report will be made public on Friday.

Jim Caron, head of macro strategies for global fixed income at Morgan Stanley Investment Management, stated that Powell's speaking will be crucial in determining how the Fed will react to recent events.

Investors are closely monitoring the Russian invasion of Ukraine and its market impact, as Russia is a significant commodity exporter. In the past week, oil prices spiked, with Brent crude reaching $105 per barrel before dropping to approximately $98 on Friday.

Diane Swonk, chief economist at Grant Thornton, believes that Powell will have to remain hawkish despite concerns about oil prices' impact on demand, as the surge in oil prices is occurring at the worst possible time and exacerbating inflation.

Market reversal

Despite some wild swings, the stock market posted a weekly gain. On Thursday, stocks fell sharply due to news of the invasion, but later bounced back. The index continued its rebound on Friday, rising more than 2%. In contrast to the initial flight-to-safety trade, bond yields reversed course and were higher on Friday.

"Treasurys are traditionally considered a safe haven asset, but you didn't make money in them during a geopolitical event," Caron said. On Friday, the 10-year yield moved back towards 2%, indicating an inverse relationship between yields and prices. "There's nowhere to go, nowhere to hide. I believe this is due to people's expectations for interest rate policy and inflation," Caron added.

Charles Schwab's chief global investment strategist, Jeff Kleintop, stated that the stock market was relieved by the clarity on sanctions against Russia following President Biden's announcement of a new round of sanctions on Thursday, after the invasion.

Kleintop stated that the limited scope of the new sanctions, which excluded energy and agriculture, would result in minimal spillover effects on the global economy. Despite this, the tightening of financial conditions and inflation concerns would persist, as they were present prior to the invasion.

The economists at Goldman Sachs predict that the impact on global GDP will be minimal because Russia and Ukraine, combined, contribute only approximately 2% to the global market-based GDP.

While spillovers through commodity markets and financial conditions may be somewhat larger, the economists pointed out that in contrast, Russia produces 11% and 17% of global oil and gas.

Fed rate hikes

Kleintop of Schwab anticipates that the stock market will remain volatile until the Fed's first rate hike, which is predicted to occur at its March meeting.

We have been experiencing a downtrend, and markets are concerned about valuations. However, as the focus shifts away from Ukraine, I believe we will return to a more challenging and volatile environment, but the possibility of a major disruptive break that fundamentally changes the backdrop is unlikely.

Caron stated that investors are seeking clarification on whether the Ukraine situation may lead to the Fed slowing down interest rate increases in 2022.

Whether the Fed will increase interest rates by 0.5% on March 16 for the first time since 2018 remains uncertain.

Gus Faucher, PNC chief economist, stated that the situation in Ukraine decreases the likelihood of a 50 basis point increase this time around, as the Fed will maintain a steady course and assess the circumstances before making any hikes.

Central bank balance sheet reduction clues will also be sought by traders.

By June or July, many investors anticipate the Fed will start decreasing its holdings of Treasury and mortgage securities, as stated by Caron.

Draining liquidity from the financial system is the goal of downsizing the balance sheet.

Caron stated that the stock market was experiencing some relief because people believed the Fed would not move as quickly as expected due to the Ukraine conflict. He added, "People believe rates will increase, but not to an uncomfortable level, so all growth equities are performing better in this environment."

The Fed's path won't be altered by the importance of the February jobs report, as he stated.

Jobs, jobs, jobs

In early February, revisions were announced that put the pace of recent job growth at about 500,000, with 467,000 payrolls added in January.

Swonk said she expects 400,000 jobs were added in February.

The economist stated that job postings increased in February following a decline during the omicron wave, indicating that there would likely be more job gains in February. Additionally, she noted the increase in job postings for the spring break season, predicting that there would be more jobs in leisure and hospitality, as well as gains in various sectors such as manufacturing and professional business services.

Boiling oil

Some strategists predict that oil prices will continue to fluctuate, while OPEC+ meets on Wednesday. On Friday, oil prices decreased as speculation increased that Iran might soon strike a deal on its nuclear program, enabling it to increase production by 1 million barrels.

According to John Kilduff of Again Capital, the market's reaction can be attributed to the presence of a substantial amount of oil.

On Friday, West Texas Intermediate crude futures experienced a 1% decline, reaching a price of $91.86 per barrel.

Bullish bet?

Some strategists believe that the market may have reached its lowest point when it rebounded on Thursday.

One investor seems to be taking a large position, indicating a belief in a market upturn.

On Friday, Pat Kernan, founder of Cardinal Capital, stated that an investor had been making a very optimistic bet in the S&P 500 for the past three days. He increased his bet today that it would continue to rise.

Kernan, a Cboe S&P 500 options pit employee, stated that the trade was a substantial wager of over $200 million.

The investor made a significant bet by purchasing 30,000 call spreads that expire on March 18, the day following the Fed meeting. Between March 4 and March 25, the investor also bought 65,000 call spreads.

The S&P 500 must be at least 4,460 for the breakeven price to be reached.

On Friday, the market underwent a complete transformation, which was quite different from its earlier state during the week, as stated by Kernan.

"Two nights ago, it was fearful and crazy to see the S&P futures market. Despite every single down tick today, they bought it, making it one of the most bizarre markets we've seen," he stated.

Week ahead calendar

Monday

The earnings of Ambarella, Nielsen, Tegna, Lordstown Motor, Endo, Zoom Video, Vroom, Novavax, and MBIA were reported.

8:30 a.m. Advance economic indicators

9:45 a.m. Chicago PMI

10:30 a.m. Atlanta Fed President Raphael Bostic

Tuesday

Monthly vehicle sales

Hewlett Packard Enterprises, Baidu, AutoZone, J.M. Smucker, Hovnanian, Kohl's, WW International, Ross Stores, AMC Entertainment, Earnings:

9:45 a.m. Manufacturing PMI

10:00 a.m. ISM Manufacturing

10:00 a.m. Construction spending

2:00 p.m. Atlanta Fed’s Bostic

Wednesday

Pure Storage, Dollar Tree, Just Eat Takeaway, Victoria's Secret, Dine Brands, and Box are the companies that reported earnings.

8:15 a.m. ADP employment

9:00 a.m. Chicago Fed President Charles Evans

At 10:00 a.m., Jerome Powell, the Fed Chair, will appear before the House Committee on Financial Services for his semiannual hearing.

2:00 p.m. Beige book

Thursday

Marvell Tech, Smith and Wesson, Toronto-Dominion Bank, Big Lots, Burlington Stores, Broadcom, Sweetgreen - Earnings.

8:30 a.m. Initial jobless claims

8:30 a.m. Productivity and costs

9:45 a.m. Services PMI

10:00 a.m. ISM Services

10:00 a.m. Factory orders

10:00 a.m. Fed Chair Powell’s semiannual hearing at Senate Banking Committee

6:00 p.m. New York Fed President John Williams

Friday

8:30 a.m. Employment report