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U.S. markets end lower as Ukraine fears keep investors on edge

The Dow slips more than 170 points in a continuation of the volatility that has largely governed trading in 2022.

Frank O'Connell, right, worked the floor last week on the New York Stock Exchange. Wall Street had a down day Feb. 14 as investors monitored Russia-Ukraine tensions. (Courtney Crow/New York Stock Exchange via AP)

The major U.S. indexes wavered on Monday, creeping down and nudging up before ending regular trading with modest losses, as the prospects for war in Ukraine kept investors on edge.

At the day’s close, the Dow Jones industrial average had slipped 171.89 points, or 0.5 percent, landing at 34,566.17. The S&P 500-stock index declined nearly 0.4 percent, shedding nearly 17 points to end at 4,401.67. The tech-heavy Nasdaq finished nearly flat, closing at 13,790.92.

It was a continuation of the volatility that lopped more than 500 points off the Dow on Friday and has largely governed trading in 2022, as investors reckoned with a host of broader economic and geopolitical issues, including looming interest rate increases, surging inflation and supply chain disruptions.

Fears that Russia is poised to invade Ukraine continue to animate the political discussion. Diplomatic efforts over the weekend by the Biden administration and its Western allies did little to quell those concerns.

Asian markets closed in the red across the board, with Japan’s Nikkei 225 declining more than 2.2 percent and Hong Kong’s Hang Seng Index sliding 1.4 percent. European indexes all retreated, with France’s CAC 40 dropping 2.2 percent and the benchmark Stoxx 600 index shedding nearly 2 percent.

“Investors fear the alarm clock is about to sound on a physical battle between Russia and the Ukraine,” Danni Hewson, financial analyst at AJ Bell, said Monday in comments emailed to The Washington Post. “Should Russia go to war with Ukraine, there is no telling how long the battle will last, and the damage wrought on the stock market.”

Cboe’s volatility index climbed 5 percent Monday. Wall Street’s so-called fear gauge has soared about 50 percent in the past month amid acute volatility, according to MarketWatch. Despite notching some gains last week, markets were sent reeling after the Labor Department reported the largest annual inflation spike since February 1982, fueling speculation that the Federal Reserve could move more aggressively than expected to raise interest rates.

Now, concerns are zeroing in on the potential economic fallout of a Russian invasion. President Biden warned over the weekend that the United States and its allies would respond “decisively and impose swift and severe costs” if Moscow attacked its neighbor. Administration officials insist any allied response this time will be much harsher than the sanctions imposed following the nation’s 2014 takeover of Crimea.

Russia is one of the world’s biggest oil producers, and military or economic conflict with the country could sow significant disruption in energy markets and beyond. The prospect of tough financial sanctions, probably targeted at Russia’s state-owned banks, is meant to deter a Russian invasion by highlighting the danger of capital outflows, a plunging currency and bank runs. Russian investors already have paid for President Vladimir Putin’s stance: The benchmark RTS stock index is down by about 25 percent since its late-October high.

Ivan Feinseth, chief investment officer at Tigress Financial Partners, said that although stocks have a long track record of shrugging off geopolitical tensions, most of those have been viewed as “easily contained by the U.S.," with little effect on global financial markets.

“However, President Biden has very little in his arsenal to use to deter Russia against any aggression other than economic sanctions and boycotts, which have proved futile in the past and very hard to enforce,” Feinseth noted Monday in comments emailed to The Post.

Oil prices climbed amid warnings from U.S. officials that an invasion of Ukraine could occur any time. Brent crude oil, the global benchmark, climbed 1.6 percent, to nearly $96 per barrel on Monday. West Texas Intermediate crude, the U.S. oil benchmark, added 2.5 percent, to top $95. Analysts have forecast that prices could exceed $100 a barrel for the first time since 2014 if tensions escalate further.

Russia is also a key supplier of critical materials such as titanium for Boeing airplanes and palladium for automotive catalytic converters. More than 400 U.S. companies have a major supplier based in Ukraine, and 1,100 have a “Tier 1” vendor in Russia, according to Interos, a supply-chain risk management company in Arlington, Va. U.S. agribusiness giants such as Cargill and ADM have sizable operations in Ukraine.

Gold, a safe haven in times of turmoil, climbed more about 1.5 percent to trade above $1,869 per troy ounce.

Government bonds, which have seen incredible upward pressure as investors anticipated more aggressive action from the Fed, edged lower but remained within striking distance of recent highs. The yield on the 10-year U.S. Treasury note crept to 2 percent Monday. Bond yields move inversely to prices.

Meanwhile, earnings season grinds onward, with investors parsing performances from Airbnb, Nvidia, Walmart, DoorDash and more in the coming days. Corporate earnings have been at the center of recent swings as investors looked for signs of inflation weighing on bottom lines.

It’s also another busy week for economic data, with investors eyeing retail, housing and manufacturing reports later this week for signs of how inflation is burdening American households and businesses. Consumer sentiment slumped 8.2 percent in the past month to a decade low, according to the University of Michigan’s consumer confidence index, as households confronted the burdens of inflation just about everywhere. The spiking cost of food, electricity and shelter helped drive inflation higher in January, and the surging costs have all but wiped out the wage gains many employers offered in a tight labor market.

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