Closing: Stocks drop sharply in de-risking move

The S&P 500 dropped 2.1% on Thursday, as risk sentiment remained pressured by negative-sounding Russia-Ukraine headlines. The Nasdaq Composite (-2.9%) and Russell 2000 (-2.5%) posted steeper declines while the Dow Jones Industrial Average (-1.8%) fared slightly better than the S&P 500.

Briefly, President Biden warned that Russia could invade Ukraine in a matter of days as reports indicated that Russia was building up troops closer to Ukraine. The Wall Street Journal also reported that Russia was possibly fabricating an excuse to invade with an accusation that Ukraine was committing crimes against residents of the eastern Donbas region.

Without any signs of de-escalation, there was little effort to buy the dip, which contributed to an orderly retreat throughout the day. Nine of the 11 S&P 500 sectors closed in negative territory, led lower by the information technology (-3.1%), communication services (-3.0%), and consumer discretionary (-2.6%) sectors.

The consumer staples (+0.9%) and utilities (+0.1%) sectors closed higher as part of the defensive shift in the market.

More specifically, Treasuries saw increased demand, pushing the 10-yr yield down eight basis points to 1.97% and the 2-yr yield down five basis points to 1.47%. Gold futures rose 1.7% to $1902.10/ozt. The CBOE Volatility Index jumped 15.7% to 28.11. The U.S. Dollar Index increased 0.1% to 95.87.

Dow components Walmart ( WMT 138.88, +5.35, +4.0%) and Cisco ( CSCO 55.77, +1.52, +2.8%) performed well following their earnings reports, but not growth stocks like NVIDIA ( NVDA 245.19, -19.92, -7.5%), Fastly ( FSLY 19.20, -9.73, -33.6%), and Matterport ( MTTR 6.54, -1.38, -17.4%).

The mega-caps received no love today. The Vanguard Mega Cap Growth ETF ( MGK 226.18, -6.89) fell 3.0%, versus a 1.8% decline in the Invesco S&P 500 Equal Weight ETF ( RSP 154.13, -2.82). Based on the latter indication, neither did the broad market.

Oil prices ($91.76/bbl, -$2.07, -2.2%) normally would have reacted positively to the geopolitical angst, but today they declined 2% amid reports suggesting that a nuclear agreement with Iran was within reach. An agreement could free up Iranian oil exports.

Also in the mix was economic data that didn’t work in the market’s favor. Weekly initial claims increased by 23,000 to 248,000 ( consensus 220,000); the Philadelphia Fed Index for February decreased to 16.0 ( consensus 20.4) from 23.2 in January; and single-family housing starts declined in every region in January, except the West (+15.7%).

Reviewing Thursday’s economic data:

  • January housing starts declined 4.1% month-over-month to a seasonally adjusted annual rate of 1.638 million units ( consensus 1.705 million) and building permits increased 0.7% month-over-month to 1.899 million ( consensus 1.750 million).
  • The key takeaway from the report is the understanding that single-family starts declined in every region in January, except the West (+15.7%), which is likely a function of labor shortages and supply constraints that will keep new supply limited and home prices elevated.
  • Initial jobless claims for the week ending February 12 increased by 23,000 to 248,000 ( consensus 220,000) and continuing claims for the week ending February 5 declined by 26,000 to 1.593 million.
  • The key takeaway from the report is that it covers the week in which the survey for the February employment report was conducted, and the pickup in initial claims could temper some of the growth forecasts for February nonfarm payrolls.
  • The Philadelphia Fed Index for February decreased to 16.0 ( consensus 20.4) from 23.2 in January.

Looking ahead, investors will receive Existing Home Sales for January and the Conference Board’s Leading Economic Index for January on Friday.

  • Dow Jones Industrial Average -5.6% YTD
  • S&P 500 -8.1% YTD
  • Russell 2000 -9.7% YTD
  • Nasdaq Composite -12.3% YTD


  • Europe: DAX -0.7%, FTSE -0.9%, CAC -0.3%
  • Asia: Nikkei -0.8%, Hang Seng +0.3%, Shanghai +0.1%


  • Crude Oil -2.23 @ 91.44
  • Nat Gas -0.21 @ 4.48
  • Gold +26.40 @ 1899.90
  • Silver +0.20 @ 23.82
  • Copper -0.02 @ 4.52