US stocks drift as investors weigh Ukraine crisis | Financial Markets News

The S&P 500 was little changed, while the Nasdaq 100 inched higher after a trading holiday on Monday.

U.S. equities drifted Tuesday as investors weighed the potential damage from sanctions to Russia after President Vladimir Putin recognized two separatist republics in eastern Ukraine and ordered troops sent to them.

The S&P 500 was little changed while the Nasdaq 100 inched higher after a trading holiday on Monday. The Stoxx 600 Index fell as much as 2% before paring back losses to trade higher. And a flight to havens eased, as benchmark Treasury yields rose to trade at 1.95%.

The European Union proposed an initial package of sanctions targeting Moscow in response to Putin’s decision to recognize the breakaway regions. It follows weeks of warnings from the U.S. and its partners that Russia could be planning to invade Ukraine, something he has repeatedly denied.

The threat of more penalties and disrupted supply kept energy prices elevated, with West Texas Intermediate crude trading close to $93 a barrel. German Chancellor Olaf Scholz said he would halt certification of the Nord Stream 2 pipeline, sending European natural gas futures 10% higher. The question now is what the U.S. and its allies would define as an invasion, and what would trigger bigger sanctions.

“The stock market is right to be concerned about current tensions between Russia and Ukraine, which run the risk of exacerbating the challenging inflation backdrop that many investors and companies have expected to improve in the back half of 2022,” wrote RBC Capital Markets’s Lori Calvasina. “The bad news is that the investment community still appears to be in the early days of understanding the potential implications of this conflict.”

Nevertheless, sentiment was more positive in Europe as traders wagered the unfolding scenario has already been priced into stocks. Russian shares pared earlier declines and the MOEX Russia index traded 2.0% higher. If the situation de-escalates, a quick 5% rally in U.S. stock markets is possible, according to Morgan Stanley strategists.

“Any positive news could reverse the bearish action and lead to sudden jumps in risk asset prices,” Ipek Ozkardeskaya, senior analyst at Swissquote, wrote in a note.

Meanwhile, investors are continuing to monitor commentary on the U.S. monetary-policy path. Fed Governor Michelle Bowman suggested that a half percentage-point increase in interest rates could be on the table next month if incoming readings on inflation come in too high. Markit manufacturing and services PMI data beat estimates, suggesting recent growth concerns have been driven by the omicron variant. However, U.S. consumer confidence is at its lowest since September.

Geopolitical risks have already led investors to pare bets on how aggressively the Federal Reserve may tighten monetary policy this year to fight inflation. Yet, John Stoltzfus, chief investment strategist at Oppenheimer, said the current headwinds “should prove beneficial to both traders looking for short-term action and investors looking to meet long-term goals.”

“From our experience of nearly 40 years in the market — if anything — the current high level of global multilevel uncertainty has potential in future hindsight to prove to have been beneficial for discerning investors willing to stay the course and even take advantage of stocks ‘on sale,’” he said.

Here are some events to watch this week:

• New Zealand rate decision Wednesday
• BOE Governor Andrew Bailey appears before the Treasury Committee Wednesday
• Bank of Korea policy decision Thursday
• EIA crude oil inventory report Thursday
• Fed officials Loretta Mester and Raphael Bostic speak Thursday
• U.S. new home sales, GDP, initial jobless claims Thursday
• U.S. consumer income, U.S. durable goods, PCE deflator, University of Michigan consumer sentiment Friday

Some of the main moves in markets:

Stocks

• The S&P 500 was little changed as of 10:17 a.m. New York time
• The Nasdaq 100 rose 0.3%
• The Dow Jones Industrial Average fell 0.4%
• The Stoxx Europe 600 rose 0.4%
• The MSCI World index fell 0.1%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro rose 0.3% to $1.1343
• The British pound fell 0.4% to $1.3554
• The Japanese yen fell 0.4% to 115.21 per dollar

Bonds

• The yield on 10-year Treasuries advanced two basis points to 1.95%
• Germany’s 10-year yield advanced seven basis points to 0.27%
• Britain’s 10-year yield advanced seven basis points to 1.48%

Commodities

• West Texas Intermediate crude rose 1.8% to $92.69 a barrel
• Gold futures were little changed

–With assistance from Andreea Papuc, Emily Barrett and Michael G. Wilson.