NEW YORK — Markets shuddered Thursday and then swung wildly after Russia’s invasion of Ukraine threatened to push the high inflation squeezing the global economy even higher.
Initially, stocks tumbled as prices surged for oil, wheat and other commodities on worries the conflict would disrupt global supplies. But the moves moderated as the day progressed, particularly after President Joe Biden said he wanted to limit the economic pain for Americans and announced new sanctions that fell short of what some had suggested.
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Traders gather on the floor of the New York Stock Exchange on Thursday. Courtney Crow/New York Stock Exchange via Associated Press
On Wall Street, the S&P 500 tumbled 2.6% at the start of trading before erasing the drop and flipping to a gain of 1.5%. The heaviest losses hit stocks in Europe, after officials called Russia’s nearby moves a “brutal act of war,” with the German DAX down 4%.
Beyond its tragic human toll, the conflict looked set to send prices even higher at gasoline pumps and grocery stores around the world. Russia and Ukraine are major producers not only of energy but also grains and various other commodities.
Oil prices on both sides of the Atlantic briefly jumped above $100 per barrel to their highest levels since 2014. But they gave back much of their gains after Biden said the sanctions package is “specifically designed to allow energy payments to continue.” While he described the sanctions as severe, Ukrainian officials urged the U.S. and West to go further and cut Russia from a crucial financial payments system called SWIFT.
“I think the market certainly could gauge here that sanctions are a little more limited, so there’s not as much transmission of economic difficulties to the rest of the world” from Russia, said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management.
Afterward, the price of U.S. oil settled at $92.81, up 71 cents for the day, well below the $100.54 it had touched earlier in the day.
Still, prices rose for everything from heating oil to wheat to gasoline. As with stocks, the movements were sharper in Europe than in the U.S. because its economy is more closely tied to Russia and Ukraine. The spot price in Europe for natural gas jumped more than 50%.
Increases in energy and food prices could amplify worries about inflation, which in January hit its hottest level in the United States in a couple generations, and what the Federal Reserve will do in turn to rein it in.
The Fed looks certain to raise rates for the first time since 2018, with the only question being how quickly and how aggressively it will move, starting next month.
In the past, the Fed has sometimes delayed big policy decisions amid uncertainty about the Kosovo war and the U.S. invasion of Iraq, for example, according to Goldman Sachs. But economists at the bank say they still expect the Fed to raise rates steadily at its upcoming meetings.
The Ukraine tensions probably just make it less likely the Fed will start the process with a bigger-than-usual increase in rates, something some Fed officials had recently suggested.
“The Fed may become more worried about the impact on economic growth and will probably want to tread more cautiously,” said Kristina Hooper, chief global market strategist at Invesco.
The Fed was already saddled with the delicate task of raising interest rates enough to stamp out high inflation but not so much as to choke the economy into a recession. Strategists at Evercore ISI said that risk still remains, and has become even more complicated by the attack on Ukraine, but that it’s “substantially greater in Europe relative to the US.”
Many investors also said that past global events, such as an invasion, have had only short-term effects on markets that last a few weeks or months.
With expectations falling for a bigger-than-usual increase in rates next month, stocks that tend to benefit the most from low interest rates led the way for indexes to pare their losses through the day. That put the spotlight on big tech stocks, and Amazon, Microsoft and Nvidia all rose 4.5% or more.
That helped the Nasdaq composite swing from a 3.4% loss in the morning to a 3.3% gain by the end of the day, rising 436.10 points to 13,473.59. It was a remarkable turnaround after the Nasdaq was on track during the morning to close 20% below its record high for the first time since the coronavirus collapsed the economy in 2020. Expectations for higher interest rates had been beating down high-growth and tech stocks for weeks.
“We’re seeing some attempt at bottom-fishing here in terms of prices,” said Haworth. Such a “buy-the-dip” ethos has proved profitable in the past, but he said he thinks it’s still “a little early. We just have a lot of uncertainty ahead of us.”
The Dow Jones Industrial Average, which isn’t as influenced by big tech stocks, rose a more modest 92.07 points, or 0.3%, to 33,223.83. It rallied back from an earlier 859-point loss. The S&P 500 rose 63.20 points to 4,288.70.
Huge swings also rocked the bond market, where yields initially sank as money moved into investments that looked to offer safer returns than stocks. But yields recovered through the day, and the 10-year Treasury yield was 1.96% in late trading, close to the 1.97% it was at late Wednesday.
The FTSE 100 in London fell 3.9% after Europe awakened to news of explosions in the Ukrainian capital of Kyiv, the major city of Kharkiv and other areas. The CAC 40 in Paris lost 3.8%. Markets in Asia fell nearly 2% or more.
Moscow’s stock exchange briefly suspended trading on all its markets on Thursday morning. After trading resumed, Russian indexes plunged by a third or more.
“How bad could this get? Well, how long is a piece of string, right?” said Jonas Goltermann, senior global markets economist at Capital Economics. “There aren’t that many obvious examples of this type of shock to markets.”
Initially, stocks tumbled as fear coursed through markets and prices surged for oil, wheat and other commodities on worries the conflict would disrupt global supplies. But the moves moderated as the day progressed, particularly after President Biden said he wanted to limit the economic pain for Americans and announced new sanctions that fell short of what some had suggested. The conflict also raised questions about whether the Federal Reserve may be less aggressive than some had feared about removing the low interest rates that investors love.
On Wall Street, the S&P 500 tumbled as much as 2.6 percent at the open of trading before flipping to a modest gain of 0.3 percent by the afternoon. The heaviest losses hit stocks in Europe, after officials called Russia’s nearby moves a “brutal act of war,” with the German DAX down 4 percent.
Beyond its tragic human toll, the conflict looked set to send prices even higher at gasoline pumps and grocery stores around the world. Russia and Ukraine are major producers not only of energy but also grains and various other commodities.
Oil prices on both sides of the Atlantic briefly jumped above $100 per barrel to their highest levels since 2014. But they gave back much of their gains after Biden said sanctions are “specifically designed to allow energy payments to continue.” While he described the sanctions as severe, Ukrainian officials urged the U.S. and West to go further and cut the Russians from a key financial system. U.S. oil was recently up a relatively modest 0.9 percent at $92.90 per barrel.
Wholesale prices rose for everything from heating oil to wheat to gasoline. As with stocks, the movements were more sharp in Europe than in the U.S. because it’s more closely tied to Russia and Ukraine. The spot price in Europe for natural gas jumped more than 50 percent.
Increases in energy and food prices could amplify worries about inflation, which in January hit its hottest level in the United States in a couple generations, and what the Federal Reserve will do in turn to rein it in.
The Fed looks certain to raise rates for the first time since 2018, with the only question being how quickly and how aggressively it will move, starting next month.
In the past, the Fed has sometimes delayed big policy decisions amid uncertainty about the Kosovo war and the U.S. invasion of Iraq, for example, according to Goldman Sachs. But economists at the bank say they still expect the Fed to raise rates steadily at its upcoming meetings. The Ukraine tensions probably just make it less likely the Fed will start the process with a bigger-than-usual increase in rates, something some Fed officials recently suggested.
“The Fed may become more worried about the impact on economic growth and will probably want to to tread more cautiously,” said Kristina Hooper, chief global market strategist at Invesco.
The Fed was already saddled with the delicate task of raising interest rates enough to stamp out high inflation but not so much as to choke the economy into a recession. Strategists at Evercore ISI said that risk still remains, and has become even more complicated by the attack on Ukraine, but that it’s “substantially greater in Europe relative to the US.”
Many investors also said that past global events, such as an invasion, have had only short-term effects on markets that last a few weeks or months.
Regardless, bond yields sank in the meantime around the world, a sign that investors were moving into things that may offer safer returns than stocks. The yield on the 10-year U.S. Treasury fell to 1.95 percent from 1.97 percent late Wednesday. Gold also continued its strong run on worries about Russia and Ukraine.
On Wall Street, worries about higher interest rates have delivered the heaviest hits on big technology stocks, a turnaround after those companies soared to lead Wall Street out of its coronavirus-caused plummet in 2020.
The Nasdaq composite, which is full of big tech stocks, was down as much as 3.4 percent Thursday and was at one point on track to close more than 20 percent below its record.
But it rallied back through the day and was recently up 1.9 percent. The Dow Jones Industrial Average was down 220 points, or 0.7 percent, at 32,911, as of 2:49 p.m. Eastern time.
The FTSE 100 in London fell 3.9 percent after Europe awakened to news of explosions in the Ukrainian capital of Kyiv, the major city of Kharkiv and other areas. The CAC 40 in Paris lost 3.8 percent.
Moscow’s stock exchange briefly suspended trading on all its markets on Thursday morning. After trading resumed, Russian indexes plunged by a third or more.
“How bad could this get? Well, how long is a piece of string, right?” said Jonas Goltermann, senior global markets economist at Capital Economics. “There aren’t that many obvious examples of this type of shock to markets.”
The closest parallel is Iraq’s invasion of Kuwait in 1990, which sent markets plunging, before they stabilized when the Fed cut interest rates. Then they recovered after U.S. forces intervened, he said.
“Now that’s clearly a very imperfect comparison,” he said. “But I think what it suggests is that a 10 or 20 percent fall in global equities is actually quite plausible.”
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