Wall Street’s main benchmarks fell sharply Thursday as investors grappled with renewed anxiety over geopolitical tensions between Russia and Ukraine following a warning from President Joe Biden that military action by the Kremlin appeared imminent.
The S&P 500 plunged more than 2% to 4,380.04, while the Dow Jones Industrial Average shed 623 points — or 1.8% — to 34,311.18, recording its worst day since Nov. 26, 2021. The Nasdaq Composite erased nearly 2.9%, falling to 13,716.72. The Russia-Ukraine conflict also weighed on oil and bond yields. Crude oil declined 2.15% to $91.65 per barrel, while the 10-year U.S. Treasury benchmark fell 7.5 basis points to yield 1.97%
U.S. President Joe Biden said on Thursday the threat of a Russian invasion of Ukraine was "very high" and “every indication [the White House had] is that [Russia is] prepared to go into Ukraine.”
The conflict has added a fresh headwind for markets already bracing for the Federal Reserve to raise interest rates as it looks to tighten monetary conditions to mitigate surging inflationary pressures. Fears that the Kremlin would green light a move to force in on its neighboring country build on the existing worries around central bank policies due to the potential of military action to exacerbate inflation and spur other economic disruptions.
“When you have a risk-off environment that we’ve been seeing all year, adding on Ukraine is certainly not going to help the situation, so I’m not surprised to see heightened sensitivity,” Barrett Asset Management Chief Investment Officer Amy Kong told Yahoo Finance Live. “In general, we have seen through time and through stock market history, that geopolitical events have stressed the market.”
Kong added such news are typically met with shock and panic, but in due time as investors digest whether such events will impact the fundamentals of the market, if the answer is no, in the long run that anxiety dissipates to a degree.
“If it were to get worse — which is a big if — a very strong stagflationary wind would blow through the global economy,” Mohamed El-Erian, president of Queens College at Cambridge University, told Yahoo Finance Live. “The marketplace now is pricing somewhere between we get a good diplomatic resolution, or we stay in this uncomfortable no war and no peace. We’re not really pricing in the possibility that this may be an armed conflict.”
Stagflation occurs when economic growth slows sharply and inflation rises.
"Markets continue to watch events in Ukraine, cycling back and forth between risk-on with the lessening of tensions and risk-off as tensions increase," Independent Advisor Alliance Chief Investment Officer Chris Zaccarelli said in a note. "This morning markets are concerned about the Russian troop buildup and a lack of trust in Putin’s declaration that they are beginning to remove troops from the region."
Markets jumped earlier this week on false reports Russia withdrew some troops from the Ukrainian border, but fears of imminent military action have since resurfaced after NATO officials said Russia was continuing its buildup of troops.
The Biden administration said Russia has added as many as 7,000 military personnel to Ukraine’s border.
“We have excellent intelligence and if the Russians in fact are removing those troops, we will see it,” John Ed Herbst, former U.S. ambassador to Ukraine, told Yahoo Finance Live on Tuesday.
Investors also continued to weigh minutes from the Fed’s last policy-setting meeting that indicated officials were weighing a near-term increase on short-term borrowing costs but did not suggest a 50 basis point hike was on their agenda.
In recent weeks, the prospect central bank policymakers could scale up their hiking cycle on a string of recent red-hot inflation prints and stronger-than-expected jobs data have weighed on stocks.
“With markets signaling the Fed’s latency on monetary policy action is a growing concern, investors were looking for any clues in the Fed minutes that allude to more aggressive policy changes in the near future,” Allianz Investment Management senior investment strategist Charlie Ripley said in a note. “In markets, timing is everything, and the delayed reaction from the Fed has investors convinced that aggressive policy tightening is on the horizon.”
“While not offering much to change that view, the Fed minutes did indicate a faster pace of tightening relative to the last hiking cycle is warranted,” Ripley said. “On balance, there was nothing in the minutes that suggested the Fed would be more aggressive than what the market has already priced in.”
On the economic data front, first-time unemployment filings unexpectedly ticked higher in the latest weekly data, capping a recent downward trend in jobless claims that signaled Omicron-related pressures on the labor market were beginning to abate.
The focus on geopolitical events has overshadowed recent economic data to an extent, Zaccarelli said, though adding the release of last week’s figures, which showed that jobless claims are up a worse-than-expected 10% this week – contributed to some of the volatility.
Construction on new residential homes fell in January for the first time in four months, also reflecting how COVID-related labor shortages weighed on recent progress in building activity.
“The supply chain problems holding back homebuilding will likely improve this year, but labor shortages will be a more persistent constraint on new home supply,” Comerica Bank chief economist Bill Adams said in a note.
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4:00 p.m. ET: US stocks plunge as likelihood of Russian attack on Ukraine intensifies
Here's how Wall Street's main benchmarks fared at the end of the session:
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S&P 500 (^GSPC): -94.97 (-2.12%) to 4,380.04
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Dow (^DJI): -623.09 (-1.78%) to 34,311.18
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Nasdaq (^IXIC): -407.38 (-2.88%) to 13,716.72
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Crude (CL=F): -$1.91 (-2.04%) to $91.75 a barrel
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Gold (GC=F): +$28.70 (+1.53%) to $1,900.20 per ounce
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10-year Treasury (^TNX): -7.5 bps to yield 1.9720%
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12:43 p.m. ET: Biden expected to issue exec order on crypto oversight, source tells Yahoo Finance
President Joe Biden is likely to issue an executive order next week directing government agencies to study cryptocurrencies and a central bank digital currency (CBDC), and come up with a government-wide strategy to regulate digital assets, a source told Yahoo Finance exclusively.
An administration official familiar with the matter told Yahoo Finance's Jennifer Schonberger the forthcoming directive will commission a study of a CBDC and ask a range of agencies – including the Departments of Treasury, State, Justice and Homeland Security – to develop a report on the future of money and payment systems.
Meanwhile, the Director of the Office of Science and Tech policy will do a technical evaluation of what might be needed to support a CBDC system.
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12:00 p.m. ET: Wall Street's main indexes post declines of more than 1%
Here were the main moves in markets during midday trading:
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S&P 500 (^GSPC): -53.57 (-1.20%) to 4,421.44
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Dow (^DJI): -413.07 (-1.18%) to 34,521.20
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Nasdaq (^IXIC): -223.84 (-1.58%) to 13,900.26
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Crude (CL=F): -$1.93 (-2.06%) to $91.73 a barrel
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Gold (GC=F): +$27.10 (+1.45%) to $1,898.60 per ounce
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10-year Treasury (^TNX): -8.2 bps to yield 1.9650%
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9:30 a.m. ET: US stocks extend losses as Russia-Ukraine conflict persists
Here were the main moves in markets as of 9:30 a.m. ET:
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S&P 500 (^GSPC): -30.03 (-0.67%) to 4,444.98
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Dow (^DJI): -224.08 (-0.64%) to 34,710.19
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Nasdaq (^IXIC): -116.58 (-0.83%) to 14,007.52
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Crude (CL=F): -$2.43 (-2.59%) to $91.23 a barrel
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Gold (GC=F): +$19.10 (+1.02%) to $1,890.60 per ounce
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10-year Treasury (^TNX): -4.7 bps to yield 2.0000%
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9:05 a.m. ET: Housing starts see sharp pullback to start 2022
Construction on new residential homes fell in January for the first time in four months as COVID-related labor shortages weighed on recent progress in building activity.
The Commerce Department’s latest snapshot of new home construction indicated housing starts declined by 4.1% last month to an annual rate of 1.64 million after ticking 0.3% higher to a revised rate of 1.71 million in December. Bloomberg consensus estimates projected a pace of 1.7 million new homes.
Meanwhile, building permits rose to an annualized 1.9 million units. The metric serves as a proxy of future construction.
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8:45 a.m. ET: Elon Musk, Tesla accuse SEC of 'endless' probe
Electric vehicle giant Tesla Inc. (TSLA) and its Chief Executive Elon Musk alleged the U.S. Securities and Exchange Commission was unfairly targeting them with an "endless" and "unrelenting" investigation amid the company leader's criticism of the government.
A lawyer for Musk and Tesla filed a letter with the U.S. District Court in Manhattan accusing the regulator of failing to distribute funds from settlements reached in 2018 over Musk's tweet that claimed he secured funding to take Tesla private.
Tesla was down 1.23% to $912.04 in pre-market trading as of 8:46 a.m. ET.
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8:38 a.m. ET: Jobless claims edge higher for the first time in four weeks
First-time unemployment filings unexpectedly ticked higher in the latest weekly data, capping a recent downward trend in jobless claims that signaled Omicron-related pressures on the labor market were beginning to abate.
The Labor Department most recent weekly jobless claims report showed 248,000 Americans filed for unemployment in the week ended Feb 12., up from 225,000 during the prior period. Economists surveyed by Bloomberg projected a read of 218,000, according to consensus data.
Prior to the latest figure, jobless claims have fallen consistently in recent weeks after a temporary surge in mid-January to a print of nearly 300,000, the highest level since October before the surge in filings began to ease over the past three weeks.
"The Omicron wave triggered a brief but startling spike in initial jobless claims, but payroll growth slowed only marginally in January, and the initial data for February from Homebase point to a rebound," Ian Shepherdson, chief economist for Pantheon Macroeconomics, wrote in a note. "At the same time, we are becoming increasingly convinced that the long-awaited rebound in labor participation is now underway, especially among women, who left the labor force in disproportionate numbers when schools and child care were closed."
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7:30 a.m. ET: Walmart jumps on better-than-expected sales forecast
Retail juggernaut Walmart Inc. (WMT) unveiled fiscal fourth quarter results ahead of market open Thursday that topped Wall Street estimates.
Walmart reported net revenue that reflected an upside surprise increase of 0.5% to $152.87 billion, beating analysts' average estimate of $151.68 billion, according to Bloomberg data.
The company also projected a full-year profit and U.S. sales above expectations, pointing to steady demand at stores even as supply-chain issues and inflationary pressures weigh on the corporate giant's margins.
Walmart forecast fiscal 2023 adjusted earnings per share to increase 5% to 6%.
Shares of Walmart jumped more than 3% in pre-market trading to $137.64 a piece as of 7:25 a.m. ET.
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7:00 a.m. ET: Stock futures dip ahead amid corporate results, unemployment data
Here were the main moves in markets in pre-market trading Thursday:
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S&P 500 (^GSPC): -21.75 (-0.49%) to 4,448.25
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Dow (^DJI): -146.00 (-0.42%) to 34,705.00
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Nasdaq (^IXIC): -89.25 (-0.61%) to 14,510.75
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Crude (CL=F): -$1.61 (-1.72%) to $92.05 a barrel
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Gold (GC=F): +$13.90 (+0.74%) to $1,885.40 per ounce
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10-year Treasury (^TNX): +0.2 bps to yield 2.0470%
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6:00 p.m. ET Wednesday: Wall Street's key benchmarks sideways after volatile session
Here were the main moves in stock futures heading into overnight trading on Wednesday:
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S&P 500 (^GSPC): +0.25 (+0.01%) to 4,470.25
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Dow (^DJI): +22.00 (+0.06%) to 34,873.00
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Nasdaq (^IXIC): +6.50 (+0.04%) to 14,606.50
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Crude (CL=F): -$2.81 (-3.00%) to $90.85 a barrel
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Gold (GC=F): +$0.40 (+0.02%) to $11,871.90 per ounce
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10-year Treasury (^TNX): +0.2 bps to yield 2.0470%
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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