Close: Geopolitical tension and monetary policy worries undercut market

The S&P 500 fell 1.0% on Tuesday, although it was down as much as 1.9% amid rising Russia-Ukraine tensions, pestering concerns about monetary policy, and weakening price momentum.

The Nasdaq Composite (-1.2%), Dow Jones Industrial Average (-1.4%), and Russell 2000 (-1.5%) also closed off their session lows, but they still lost more than 1.0%.

Today’s trading narrative was catalyzed by Russia’s decision to recognize the independence of Ukraine’s Donetsk and Luhansk regions and send “peacekeeping” troops to the oblasts. The U.S., UK, and EU announced initial sanctions, and Germany halted the approval process for the Nord Stream 2 pipeline from Russia.

All that transpired before the open, yet the futures market recovered losses and the S&P 500 briefly traded in positive territory after the open. Buyers lacked resolve, though, giving way to a broad-based decline and losses in all 11 S&P 500 sectors.

The consumer discretionary sector (-3.0%) was easily the weakest performer, largely due a 9% decline in Home Depot ( HD 316.17, -30.70, -8.9%) following its conservative FY22 sales guidance. The utilities sector outperformed on a relative basis with a 0.1% decline.

Amid the geopolitical uncertainty, and slower growth prospects highlighted by Home Depot’s guidance, investors remained concerned about the impacts of the Fed’s tightening course.

The 2-yr yield rose eight basis points to 1.55% following rate-hike commentary from Fed Governor Bowman (FOMC voter) on Monday. Strikingly, the 10-yr yield increased two basis points to 1.93% despite the geopolitical tensions, supporting the case that the market was influenced by more than the Russia-Ukraine headlines.

Granted, the market did come off session lows in the afternoon after President Biden announced new sanctions on Russia, including sanctions on sovereign debt, two large financial institutions, and Russian elites and family members. Mr. Biden threatened additional sanctions if Russia escalates the situation.

The S&P 500 jumped nearly 70 points off its low in the course of an hour, but sellers came back in to spoil the rebound bid. The S&P 500 closed 10.3% off its record closing high, and at its lowest closing level since Oct 4.

WTI crude futures settled above $92 per barrel ($92.27, +1.06, +1.2%) after flirting with $95 per barrel overnight. The U.S. Dollar Index was little changed at 96.07. The CBOE Volatility Index increased just 3.8% to 28.81 after topping 32.00 intraday.

Reviewing Tuesday’s economic data:

  • The Conference Board’s Consumer Confidence Index dropped to 110.5 in February ( consensus 109.0) from a downwardly revised 111.1 (from 113.8) in January. In the same period a year ago, the index stood at 95.2.
  • The key takeaway from the report is the recognition that expectations for short-term growth prospects weakened, pointing to a possible moderation in spending activity in coming months, particularly if inflation pressures remain persistent and real disposable personal income is negative.
  • The S&P Case-Shiller Home Price Index for December increased 18.6% year-over-year ( consensus 18.3%) following an 18.3% increase in November.
  • The FHFA Housing Price Index for December increased 1.2% month-over-month following a revised 1.2% increase (from 1.1%) in November.
  • The preliminary IHS Markit Manufacturing PMI for February increased to 57.5 from 55.5 in January while the preliminary Services PMI increased to 56.7 from 51.2 in January.

Looking ahead, investors will receive the weekly MBA Mortgage Applications Index on Wednesday.

  • Dow Jones Industrial Average -7.5% YTD
  • S&P 500 -9.7% YTD
  • Russell 2000 -11.8% YTD
  • Nasdaq Composite -14.5% YTD


  • Europe: DAX -0.3%, FTSE +0.1%, CAC -0.0%
  • Asia: Nikkei -1.7%, Hang Seng -2.7%, Shanghai -1.0%


  • Crude Oil +1.23 @ 91.28
  • Nat Gas +0.07 @ 4.49
  • Gold 7.10 @ 1906.10
  • Silver +0.27 @ 24.21
  • Copper -0.03@ 4.50