Traders also took risk off the table ahead of a U.S. holiday on Monday.
Stocks fell, while bonds rose at the end of a turbulent week marked by tensions between the West and Russia as well as worries about the Federal Reserve’s next policy moves.
The swings in stocks intensified ahead of the close, with Friday’s $2.2 trillion options expiration exacerbating the moves. The S&P 500 briefly turned positive before resuming its decline, with tech, energy and industrial stocks pushing the gauge down. Traders also took risk off the table ahead of a U.S. holiday on Monday. The Nasdaq Composite fell into a “death cross,” a technical pattern that at times hinted at further weakness. 10-year Treasury yields approached 1.9%, while oil pared losses after falling 3% earlier in the day. Bitcoin traded near its key psychological level of $40,000.
The United States said Russia had mustered up to 190,000 people in and around Ukraine, calling it the largest military mobilization since World War II. Russia told the United States this week that it had no intention of attacking. Citing escalations in Ukraine’s dissident Donbass region, Russian President Vladimir Putin called on Kyiv to “sit down to the negotiating table” with separatist leaders “and agree on political, military, economic and humanitarian measures to put end to the conflict”. The Kiev government refuses to negotiate with the Russian-backed separatists.
One of the more dovish Fed officials has called for a “substantial” policy shift – while downplaying the need for aggressive tightening – as a second pushed back a half-point hike next month . Friday’s remarks by Chicago Fed Chairman Charles Evans and his New York counterpart John Williams implicitly reinforced the message that the US central bank will raise rates by a quarter point at its meeting. of March, even if the main leaders remain open-minded about their level. will eventually have to leave.
“Fear can be a good development for markets,” wrote Callie Cox, US investment analyst at eToro. “When investors get nervous, they tend to add more cash and hedge their positions. The worst market storms usually happen when investors least expect it. Right now, we’re covered and ready for a big punch to the stomach, but it might not hurt as much as we think.It’s a good recipe for a relief rally when the headlines die down.
“Things remain fluid and we believe markets will remain subject to bouts of risk and risk in the coming days,” wrote Win Thin, global head of currency strategy at Brown Brothers Harriman.
“While there have been reports of de-escalation of tensions, nothing has fundamentally changed to prevent investors from continuing to fear a possible Russian invasion,” wrote Fawad Razaqzada, an analyst at ThinkMarkets. “Beyond that, investor sentiment is likely to remain pessimistic anyway given concerns over rising inflationary pressures around the world and Fed policy tightening.”
After their worst start to the year in decades, Treasuries are reaffirming their safe-haven status and eclipsing the appeal of riskier assets — a troubling combination for strategists at Bank of America Corp. U.S. sovereign debt attracted $7.4 billion in inflows, the most since the start of the coronavirus pandemic, according to a BofA note citing data from EPFR Global for the week through Wednesday.
Some corporate highlights:
- General Electric Co. has warned that supply chain issues, labor shortages and material inflation will dampen its business until at least the middle of this year.
- DraftKings Inc. added fewer new customers in the fourth quarter than Wall Street expected, even after spending hundreds of millions of dollars to attract new bettors.
- Deere & Co., which raised its 2022 guidance on Thursday, issued a cautionary note on the outlook as continued supply chain bottlenecks weigh on the farm machinery maker’s efforts to respond to a robust demand.
For more market analysis, read our MLIV blog.
Some of the major movements in the markets:
- The S&P 500 fell 0.7% at 4 p.m. PT
- The Nasdaq 100 fell 1.1%
- The Dow Jones Industrial Average fell 0.7%
- The MSCI World index fell 0.9%
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.3% to $1.1326
- The British pound fell 0.1% to $1.3599
- The Japanese yen fell 0.1% to 115.10 per dollar
- The yield on 10-year Treasury bills fell four basis points to 1.92%
- Germany’s 10-year yield fell four basis points to 0.19%
- The UK 10-year yield fell nine basis points to 1.38%
- West Texas Intermediate crude fell 0.1% to $91.65 a barrel
- Gold futures fell 0.2% to $1,899 an ounce – With help from Sunil Jagtiani, Abigail Moses, Cecile Gutscher, Sharon Cho, Alex Longley and Emily Graffeo.