Wall Street’s sour mood dragged into another day Friday amid a maelstrom of uncertainty surrounding Russia and Ukraine, with the Dow sliding more than 200 points to wrap up another choppy week.
“While we’re still being warned that a Russian invasion is highly likely, the meeting does offer hope that nothing will happen before then which is bringing some stability in the markets,” Craig Erlam, senior market analyst with OANDA, said Friday in comments emailed to The Washington Post. “We could still see some risk aversion creeping in as we near the close, given how quickly these situations can change.”
By Friday’s close, the Nasdaq had shed 1.2 percent, or 168.65 points, to close at 13,548.07. The tech-centric index is down 1.8 percent for the week and 13.4 percent for the year, according to MarketWatch.
The S&P 500 index fell 0.7 percent, or 31.39 points, to land at 4,348.87. It erased 1.4 percent this week and is down 8.8 percent in 2022.
The Dow Jones industrial average lost 0.7 percent, or 232.85 points, to settle at 34,079.18. It’s off 1.9 percent for the week and 6.2 percent year to date.
The markets often shrug off major geopolitical conflicts, but investors have been keeping a wary eye on the standoff given Russia’s role as one of the world’s biggest energy producers. The crisis could have significant implications for the economy, including worsening already high inflation. President Biden has warned that United States and its allies would respond in the event of a Russian invasion and impose “severe” costs.
Biden met with other Western leaders Friday to discuss the standoff. U.S. officials have obtained intelligence that Russia’s announced military pullback from Ukraine’s border was a ruse to mislead the United States and other world powers. Biden told reporters that an invasion remains a “very high” threat and could happen within days.
Meanwhile, in Munich, Vice President Harris was set to meet with NATO Secretary General Jens Stoltenberg, representatives of NATO’s three Baltic states and Ukrainian President Volodymyr Zelensky at a major security conference.
Overseas, Asian indexes were mostly negative, led by Hong Kong’s Hang Seng Index, which shed nearly 1.9 percent. The pan-European Stoxx fell 0.8 percent.
In past run-ups to major global conflicts, such as the Gulf War or the wars in Iraq and Afghanistan, volatility peaked ahead of an invasion, according to Wayne Wicker, chief investment officer at MissonSquare Retirement.
“It tends to be a pattern where people sell into the uncertainty before a conflict occurs, and then once the conflict takes place markets tend to start to reverse and go higher,” Wicker told The Post. “It’s that uncertainty that gets stock markets kind of shaky.”
Market volatility has been rampant this year, even before the current conflict. A steady drumbeat of economic data has offered frequent reminders that inflation is at its highest level in decades, resulting in surging prices everywhere from the grocery counter to the gas pump. The Federal Reserve has said that rate hikes are imminent, but the timeline is yet unclear. Raising rates is the central bank’s most powerful lever against inflation, but higher rates can also limit business activity, which can hit stocks — especially highflying companies — hard.
“The market is in ‘wait and see mode’, as investors brace for the Federal Reserve’s next move,” Robert Schein, chief investment officer of Blanke Schein Wealth Management, said Friday in comments emailed to The Post. “Growth stocks continue to struggle and rising interest rates are a headwind to this sector’s profitability, particularly for companies in this space that are trading well above what their earnings are.”
A steady stream of strong corporate earnings and dropping omicron cases had fueled hopes that the recovery was still chugging along. But many thorny complications remain, from a vexed labor market to a supply chain in deep distress and the ongoing pandemic. Wall Street’s fear gauge, Cboe’s volatility index, is up 65 percent year to date, according to MarketWatch.
Oil prices wavered Friday, with Brent crude, the international oil benchmark, growing nearly 0.8 percent to $93.73 per barrel. West Texas Intermediate crude, the U.S. benchmark, edged down 0.1 percent to $91.66 per barrel.
Gold, an investor haven in times of turbulence, fell about 0.6 percent to $1,900.80 per troy ounce.
Government bonds, another safe haven which has seen incredible pressure amid surging global inflation, swung lower Friday. The yield on the 10-year U.S. Treasury note edged down to 1.925 percent. Bond yields move inversely to prices.