Dow futures drop more than 400 points as Russia-Ukraine tensions brew

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, United States, February 15, 2022.

Brendan McDermid | Reuters

Stock futures fell sharply on Monday evening as traders continued to monitor tensions between Russia and Ukraine.

Futures contracts linked to the Dow Jones Industrial Average fell 476.43 points, or 1.4%. S&P 500 futures slid 1.7% and Nasdaq 100 futures fell 2.2%. The US stock market was closed on Monday due to the President’s Day holiday.

Oil prices rose as West Texas Intermediate futures jumped 3.6% to $94.30 a barrel.

Russian President Vladimir Putin said on Monday he would recognize the independence of two breakaway regions in Ukraine, which could undermine peace talks with President Joe Biden. The announcement was followed by news that Biden was set to order sanctions against breakaway regions of Ukraine, with the European Union pledging to take further action.

Putin then ordered forces in the two breakaway regions.

The news came after the White House said Sunday that Biden had agreed “in principle” to meet with Putin in a new effort to defuse the Russia-Ukraine situation through diplomacy. White House press secretary Jen Psaki said the summit between the two leaders would take place after a meeting between Secretary of State Antony Blinken and his Russian counterpart Sergei Lavrov.

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The Russian-Ukrainian conflict has put pressure on market sentiment recently, with major averages posting back-to-back weekly losses. The Dow Jones fell 1.9% last week, and the S&P 500 and Nasdaq Composite fell 1.6% and 1.8% respectively.

Traders are also keeping an eye on the Federal Reserve as the US central bank is expected to raise rates multiple times starting next month. According to CME Group’s FedWatch tool, traders are betting there’s a 100% chance of a Fed rate hike after the March 15-16 meeting.

Expectations of monetary policy tightening put pressure on equities, especially those in rate-sensitive sectors like technology, and pushed the Treasury yield sharply higher in early 2022. The benchmark Treasury yield 10-year ended last week around 1.93% after briefly rising above 2%. The 10-year started 2022 at around 1.51%.

“All eyes are on the Fed,” Strategas investment strategist Ryan Grabinski wrote in a note released Friday evening. “As of today, the market expects the Fed to raise interest rates at almost every meeting this year. Despite this, we have left monetary policy as supportive for now as the Fed continues to buy Treasuries (a dovish policy measure).”

Meanwhile, Wall Street is gearing up for the end of corporate earnings season, with Home Depot and eBay among the companies expected to report this week. It’s been a strong earnings season so far: Of more than 400 S&P 500 companies that reported fourth-quarter results, 77.7% beat analysts’ expectations, according to FactSet.

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