Wall Street’s main benchmarks were little changed in post-market trading Monday as investors continued to weigh the escalating threat of Russian military action against Ukraine and the prospect of swifter monetary tightening by the Federal Reserve.
Futures tied to the S&P 500, Dow Jones Industrial Average and Nasdaq hovered near the flatline heading into the overnight session after closing in negative territory on Monday.
Fears that the Kremlin will green light a move to force in on Ukraine as soon as this week have created a new headwind for global markets worried the conflict could exacerbate inflation and spur other economic disruptions. Mounting geopolitical tensions have worsened in recent days, with US officials warning a potential war was possible. the Wall Street Journal reported on Monday the US was closing its embassy in Kyiv and destroying networking and computer equipment as a Russian military attack becomes increasingly imminent.
“The escalation of Russia and Ukraine tensions come at a time when the stock market is already vulnerable given inflation worries and the potential for Federal Reserve tightening,” Sanders Morris Harris Chairman George Ball said in a note. “If an armed conflict between Russia and Ukraine is somehow avoided, a short-lived relief rally is likely, but there are still too many worries on the horizon upward for any type of longer lasting move higher in stocks.”
The geopolitical tensions add to the uncertainty around central bank policy that has dominated market sentiment in recent months. Last week, the Labor Department reported the Consumer Price Index (CPI) notched a steeper-than-expected 7.5% increase over the year ended January to mark the largest annual jump since 1982.
The surge heightened calls for the Federal Reserve to intervene more aggressively than anticipated to rein in soaring price levels, even raising the possibility of an emergency hike before the bank’s next policy meeting in March.
“You have everything laid out perfectly for the market to go lower,” he said, pointing to higher interest rates, slow earnings, and slow economic growth around the globe. “There’s no good reason to see this market go higher.”
Comerica Wealth Management Chief Investment Officer John Lynch pointed out in a note that despite recent volatility in interest rates and equities, areas of the fixed-income markets have exhibited less turbulence. With corporate credit stress limited for investment grade and high-yield bonds, 10-year breakeven inflation expectations remain contained.
“We believe it is important for investors to focus on market signals, rather than headlines, while also respecting traditional patterns for prices, interest rates, and equity valuations,” Lynch said.
Although earnings season is slowly winding down, investors will tune in this week for another docket of corporate results to weigh against monetary and geopolitical conditions.
Investors can expect reports from companies including Walmart (WMT), Marriott International (MAR), ViacomCBS (VIAC), and Airbnb (ABNB) on Tuesday. On the economic front, a fresh read on the Producer Price Index for January and retail sales are due out before open to serve as another inflation snapshot for markets.
6:02 pm ET: Futures open flat after Russia-Ukraine tensions weigh on earlier session
Here were the main moves in markets ahead of overnight trading Wednesday:
S&P 500 (^GSPC†: +3.25 (+0.07%) to 4.397.25
dow (^DJI†: +6.00 (+0.02%) to 34,477.00
Nasdaq (^IXIC†: +16.75 (+0.12%) to 14,269.75
Crude (CL=F†: -$0.74 (-0.78%) to $94.72 a barrel
gold (GC=F†: +$3.80 (+0.20%) to $1,873.20 per ounce
10-year Treasury (^TNX†: +4.1bps to yield 1.9960%
Alexandra Semenova is a reporter for Xdigitalnews Finance. Follow her on Twitter @alexandraandnyc
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