Nasdaq, S&P 500 and Dow Jones drop as Ukraine conflict sends oil surging
Although they ticked off their lows in the final minutes of trading, U.S. stocks closed Tuesday's session sharply lower as Russia ratcheted up its invasion in Ukraine, pushing the price of oil past $100 per barrel and sending Treasury yields down.
The Dow Jones dropped 1.8%, and the S&P 500 slipped 1.6%, and Nasdaq fell 1.6%.
Looking at preliminary closing numbers, the Dow Jones Industrial Average dropped 597.65 to close at 33,294.95. The S&P 500 fell 67.68 to end at 4,306.26. The Nasdaq retreated 218.94 to 13,532.46.
Showing the broad weakness that marked trading, 10 out of 11 S&P 500 industry sectors finished in the red, led by a 3.7% drop in Financials. Energy was the lone holdout, with higher oil prices fueling another rally in the sector.
10-year Treasury yield dropped 11 basis points to 1.73%. The 2-year yield retreated about 8 basis points to 1.35%.
Crude oil is up 8.7% to $104.39 per barrel, gold rises 2.4% to $1,947 per ounce; wheat futures rise 5.4% to 984 cents per bushel.
The military actions in Ukraine and the raft of economic sanctions against Russia have investors on edge. In its equity markets positioning model note, Citi analyst Chris Montagu wrote: "Investors are increasingly net short across most markets ... U.S. futures positioning is extended and one-sided short for Nasdaq 100 and increasingly bearish for S&P 500."
With the Russia-Ukraine conflict looming over the global economy and threatening to derail the U.S. economic recovery, traders have abandoned expectations of a 50-basis point rate hike at the Fed's March 15-16 policy meeting. The probability of a 25-bps hike now stands at 92% vs. 58.6% a week ago, according to the CME FedWatch Tool. A week ago, the probability of a 50-bps hike stood at 41%; now it's at 0.
The February jobs report, due to be released on Friday, could change that. "While most now expect the Fed to raise rates by just 25 basis points next month, a hotter-than-expected jobs report on Friday could increase odds for a 50-basis point move," Anthony Saglimbene, global market strategist at Ameriprise, told Bloomberg.
Earlier, Russia retaliates against Western sanctions; Moscow Stock Exchange still closed