Russia-Ukraine Crisis Deepens

By Connor Smith |  Tuesday, February 22 Correction Territory. U.S. equities returned from the holiday weekend on a low note after Russia moved troops into eastern Ukraine. The S&P 500 index fell 1%, to 4,304.76, off more than 10% from its Jan. 3 record close of 4,796.56. It's the index's lowest close since Oct. 4, 2021. The Dow Jones Industrial Average dropped 1.4%, to its lowest close since June 18, 2021, while the Nasdaq Composite fell for its fourth-straight trading day, with a 1.2% decline. Barron's Pierre Briançon says that the move by Russia will bring economic pain in Moscow, throw Europe's energy markets into turmoil, and soften the global recovery. It will also affect companies doing business with Russia, he wrote: There will now be rising uncertainty about the geopolitical context, a major hit to consumers’ and businesses’ confidence, and serious difficulties for the companies most involved in trade with or investment in Russia. Major German industrial companies and French banks are on that list.  The U.S. and its Western allies knew how serious the consequences of a Russian invasion would be—both for Moscow and themselves. A slowdown in Europe, the world’s largest trading power, is a real possibility—and would have ripple effects throughout the global economy. Barron's Jacob Sonenshine notes that investors are also worried that the U.S. and other countries could impose sanctions on Russian exports of oil. That isn’t happening yet. President Joe Biden spoke Tuesday afternoon and didn’t announce any sanctions on Russian oil exports. He did unveil sanctions on two large Russian financial institutions, blocked off the country’s ability to issue sovereign debt in the West, and said sanctions on Russian elites will go into effect on Wednesday. Biden has also signed an executive order prohibiting new investment, trade and financing by the U.S. in separatist regions of Ukraine. In order for the stock market to experience another downward jolt from here, there would have to be heavy sanctions on Russian oil. “Regarding Ukraine, investors will await the announcement of new sanctions from the west against Russia and depending on how severe they are, it could add to the selling pressure on stocks,” wrote Tom Essaye, founder of Sevens Report Research.  And as Sonenshine points out, West Texas Intermediate crude oil, at $92.35 a barrel today, is still below a multiyear high of $95 a barrel. Investors will be watching closely to see if the need for sanctions can be avoided.

 

DJIA: -1.42% to 33,596.61 S&P 500: -1.01% to 4,304.76 Nasdaq: -1.23% to 13,381.52 The Hot Stock: Kraft Heinz +5.0% The Biggest Loser: Home Depot -8.9% Best Sector: Utilities -0.1% Worst Sector: Consumer Discretionary -2.9%