Mid-day: Russia invades Ukraine, Nasdaq pares losses

Russia invaded Ukraine last night, and the stock market fell more than 2.5% shortly after the open. Right now, things are looking better, particularly for the growth stocks, as investors await a speech from President Biden at 1:30 p.m. ET.

The Nasdaq Composite is down 0.1% after being down 3.5% intraday. The S&P 500 is down 1.0%, and the Dow Jones Industrial Average is down 2.0%.

Severe sanctions against Russia are expected, and the potential economic fallout was appropriately priced in the 38.3% plunge in Moscow’s RTS Index. The Europe Stoxx 600 dropped 3.3% on Thursday.

The mega-caps, meanwhile, have led the rebound effort in the U.S. after the Nasdaq entered bear market territory, or down 20% from a recent high. The Vanguard Mega Cap Growth ETF ( MGK 214.84, -0.04, unch) trades flat while the Invesco S&P 500 Equal Weight ETF ( RSP 155.38, -2.78) trades lower by 1.8%.

Ten of the 11 S&P 500 sectors are still trading lower with losses ranging from 0.1% (information technology) to 3.7% (financials). The communication services sector (+0.1%) is holding onto a slim gain.

The energy sector (-1.4%) has been dislocated from higher crude prices ($96.88, +4.78, +5.2%), which topped $100 per barrel earlier today. The financials sector has been pressured by the drop in Treasury yields as investors put their money in safe-haven assets.

The 10-yr yield is down six basis points to 1.92%, although it dipped below 1.85% overnight. The 2-yr yield is down eight basis points to 1.52%. The U.S. Dollar Index is up 1.1% to 97.22.

Notwithstanding the dip-buying activity in the mega-caps, there is still an air of suspicion in the price action considering the market’s tendency to sell into rebound attempts and the headline uncertainty regarding Russia-Ukraine.

Reviewing today’s economic data:

  • New home sales decreased 4.5% month-over-month in January to a seasonally adjusted annual rate of 801,000 units (Briefing.com consensus 805,000) from an upwardly revised 839,000 (from 811,000) in December.
  • The key takeaway from the report is the recognition that the sale of lower-priced homes has decelerated, likely due to less supply and affordability pressures. That is leading to higher-priced homes accounting for a larger percentage of new homes sold, which is driving up both median and average selling prices.
  • Initial jobless claims for the week ending February 19 decreased by 17,000 to 232,000 (Briefing.com consensus 240,000) and continuing claims for the week ending February 12 decreased by 112,000 to 1.476 million – the lowest level since March 14, 1970.
  • The key takeaway from the report is that initial claims are at a level that is consistent with a tight labor market.
  • Q4 GDP was revised up to 7.0%, as expected, from the advance estimate of 6.9%, but the GDP Price Deflator was also revised up to 7.1% (Briefing.com consensus 6.9%) from the advance estimate of 6.9%.
  • The key takeaway from the report is the recognition that inventory building accounted for the bulk of the GDP increase in Q4, accounting for 4.90 percentage points. Real final sales of domestic product, which exclude the change in private inventories, were up 2.0%.