Wall Street closed at its lowest on Tuesday for the year 2022 as investors reacted to the increasing tension between Russia and Ukraine. DJIA dropped 482.57 points to 33,596.61 while NASDAQ plunged to 13,381.52 after declining 166.55 points. The Dow experienced the largest decline of 1.42% having only 5 gainers on the index.
This came after a barrage of sanctions directed to Russia from Ukraine, US, UK, Germany, Japan and Australia after Russia ordered troops to ‘invade’ Donetsk and Luhansk. In his speech on Tuesday, President Biden issued sanctions targeting Moscow’s sovereign debt and indicated issuance of further sanctions should Russia make true its invasion. “We’re implementing full blocking sanctions on two large Russian financial institutions: V.E.B. and their military bank… we’ve cut off Russia’s government from Western financing. It can no longer raise money from the West and cannot trade in its new debt on our markets or European markets either,” he said.
Ukraine sanctioned 351 Russians that were in support of the independence of the rebel regions. The sanctions restricted them from accessing assets, capital and property for business including a ban of entry into Ukraine. This move was supported by the 27 EU member states.
Despite the instability in Wall Street, traders have signaled an uptake of bonds as they bet high on an imminent spike on the interest rates. The plunge in the stock market drove investors to the U.S. treasuries with the bond market experiencing upswings, albeit small. The 10-year bond gained 0.019, while the 1-year bond increased by 0.026.
The futures bolstered a correction in the market as they traded higher on Wednesday morning. Dow futures rose 188 points while the NASDAQ futures increased by 127 points. While there have been past successful recoveries following geopolitical tensions, more factors limit a sooner recovery. “The contagion risk will completely feed into inflationary pressures as energy costs will skyrocket and that will derail large parts of the economic recovery coming out of Covid,” Edward Moya, a senior market analyst at Oanda, opined. According to Robert Schein, CIO at Blanke Schein Wealth Management, however, Fed policies ought to be the most critical determinants of market stability as the Russia-Ukraine invasion holds little element of surprise.
The U.S. consumer confidence declined to 110.5 in February, down from 111.1 in January in tandem with the expectations index that dropped from 88.8 to 87.5. According to the The Consumer Confidence Survey report released on Tuesday, consumers were more pessimistic regarding the short-term labor market and short-term financial prospects. The number of consumers planning to purchase homes, automobiles, major appliances or go for holiday in 6 months also diminished pointing weaker prospects for short-term growth in the economy. The projections for economic growth also remain conservative for the next 6 months.
Tuesday Highlights
