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Stocks tumble as Russian attack on Ukraine roils global markets.
Stocks rose on Wednesday to recover some steep losses from earlier this week, with jitters over Russia’s war in Ukraine and its implications for the global economy weighing on risk assets. Investors also monitored fresh remarks from Federal Reserve Chair Jerome Powell, who said the central bank remained on track to raise interest rates later this month as the economy remained firm despite ongoing geopolitical tensions.
The S&P 500 advanced. On Tuesday, the blue-chip index slid 1.6%, extending Monday’s losses to kick off March trading on shaky footing. The Dow and Nasdaq each also rebounded after falling sharply earlier this week, with risk assets reeling as investors contemplated the potential for more widespread supply chain and financial market disruptions as Russia deepened its attacks in Ukraine, and Western sanctions progressed.
Amid the ongoing geopolitical concerns, energy prices climbed, and West Texas intermediate crude oil prices rocketed further above $100 per barrel to top $112 and reach the highest level since 2011. OPEC+ said Wednesday that it would continue to increase output in April by 400,000 barrels per day compared to March, keeping this rate of production increases in-line with recent months’ rises despite strained oil supplies.
The latest move higher in energy markets also came even after the International Energy Agency agreed Tuesday to release 60 million barrels from global stockpiles to help ease some pressure in the tight energy market.
“The problem is that that would not be enough to offset a potential supply shock coming from Russia, which is really what the market is grappling with right now,” Ahmed Riesgo, Insigneo chief investment officer, told Yahoo Finance Live.
“The key question that all investors have to ask themselves right now is, are Russian exports going to stop? And if the answer to that is yes, then we need to de-risk further,” he added about the broader markets. “And if the answer is no, then this could potentially be near a bottom.”
The West’s sweeping sanctions against Russia have so far formally included restrictions on Russia’s central bank, access to the SWIFT global payments system, and freezes on a variety of key Russian institutions’ and officials’ assets, among some other measures.
Many major companies have also added further pressure to Russia, including Apple (AAPL), which said Tuesday it would pause all product sales to the country, and Disney (DIS), which said it will stop releasing films in Russia. Still, with many S&P 500 components seeing relatively little exposure to Russia and Ukraine from a revenue standpoint, many strategists suggested the direct fallout to U.S. corporate profits and broader economy will likely be relatively contained.
“Concerns are growing that the ramped-up sanctions on Russia and its leaders, now including restrictions on the important SWIFT banking system, as well as the Russian central bank and Putin himself, will have repercussions on global commerce that are hard to predict,” Louis Navellier, chairman and founder of Navellier & Associates, wrote in a note. “This is on top of the disruption of all the products that Ukraine itself delivers to the world markets. It is generally believed that the majority of the damage will hit Europe, with China already seen stepping up to provide alternate markets for Russian exports, making the U.S. even more of a safe haven than it was already considered.”
Still, the uncertainty generated by the war and the potential for higher global energy prices have left investors betting the Federal Reserve will eschew an ultra-hawkish tilt after its March monetary policy meeting. Fed Chair Jerome Powell is set to testify before Congress on Wednesday starting at 10 a.m. ET as part of his semi-annual appearance before lawmakers, offering the Fed leader’s first public remarks on how the geopolitical situation has informed the central bank’s thinking on interest rate hikes and monetary policy tightening for the rest of the year. And to that end, Powell said in prepared remarks that he still expects “it will be appropriate to raise the target range for the federal funds rate at our meeting later this month,” though the geopolitical tensions will require the Fed to be “nimble.”
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