Mid-day: Russia-Ukraine situation continues to drive volatility

The Russia-Ukraine situation continues to drive volatility in the market. The S&P 500 is flirting with session lows with a 1.1% decline after briefly peaking above its flat line earlier today.

The Nasdaq Composite is down 0.6%, the Dow Jones Industrial Average is down 1.2%, and the Russell 2000 is down 0.5%.

Over the weekend, President Putin placed Russia’s nuclear forces on high alert in response to further involvement/sanctions from the West. Two of those sanctions included blocking select Russian banks from the SWIFT financial transactions system and preventing Russia’s central bank from accessing foreign currency reserves.

Bringing “nuclear” into the headlines for an escalating geopolitical situation isn’t the best way to kindle risk sentiment, particularly when Russia’s economy and currency are suffering as a result. To the market’s credit, U.S. stocks are trading well off last week’s intraday lows.

Presently, ten of the 11 S&P 500 sectors are trading lower with losses ranging from 0.3% (utilities) to 2.4% (real estate). The energy sector is bucking the negative trend with a 1.2% gain, largely due to the 4.5% gain in crude futures ($95.78/bbl, +4.17).

Tesla ( TSLA 860.22, +50.23, +6.2%) is providing offsetting support for the consumer discretionary sector (-0.3%) after Daiwa upgraded the stock to Outperform from Neutral, albeit with a reduced price target of $900 (from $980).

Away from equities, the Treasury market is rallying amid safe-haven bids, growth concerns, short-covering activity, and a belief that the Fed may tone down its hawkishness at its next policy meeting in March.

Accordingly, the 2-yr yield has dropped 16 basis points to 1.43%, and the 10-yr yield has dropped 12 basis points to 1.87%. The U.S. Dollar Index is up 0.2% to 96.82.

Reviewing today’s economic data:

  • The Chicago PMI for February decreased to 56.3 (Briefing.com consensus 62.0) from 65.2 in January.
  • The Advance report for International Trade in Goods for January showed a deficit of $107.6 billion, versus a revised $100.5 billion (from $101.0 billion) in December. The Advance report for Retail Inventories for January rose 1.9%, while the Advance report for Wholesale Inventories for January rose 0.8%.