Any sense of relaxation after the long holiday weekend was snuffed out on Monday, as the escalating conflict between Ukraine and Russia sent the S&P500 in correction territory for the first time since 2020.
Over the weekend, Russian President Vladimir Putin ordered troops into areas of eastern Ukraine – a move President Joe Biden called an “invasion” and which was sanctioned by international sanctions.
Among them: Biden has banned US financial institutions from processing any transactions from the major Russian bank VEB and the country’s military bank, Promsvyazbank, while British Prime Minister Boris Johnson has said his country’s first round of sanctions will target IS Bank, General Bank and other Russian financial institutions.
Commodities rose – US crude oil prices rose 1.4% to $92.35 a barrel while gold rose 0.4% to an eight-month settlement at 1,907.40 $ an ounce.
But stocks fell throughout the session, dragged down by the consumer discretionary sector (-2.9%), which saw the likes of You’re here (TSLA, -4.1%) and best buy (BBY, -7.3%) suffer significant declines.
The S&P 500, down 1.0% at 4,304, has finally dipped into correction territory (a drop of 10% or more from a high). the Nasdaq Compound (-1.2% to 13,381) remains in correction, while the Dow Jones Industrial Average (-1.4% to 33,596) is expected to drop a further 2.0% to mark a 10% decline from its January 3 high.
Other news on the stock market today:
- Small cap Russell 2000 fell 1.5% to 1,980.
- Bitcoin was punished, falling 5.3% from Friday’s levels at $37,925.63 (Bitcoin is trading 24 hours a day; prices shown here are as of 4 p.m.)
- Home deposit (HD) was the worst Dow Jones stock today, losing 8.9% after earnings. The home improvement retailer reported higher-than-expected earnings per share of $3.21 and revenue of $35.7 billion in the fourth quarter, but gave a cautious outlook for fiscal 2022 to hold account of rising inflation. Still, CFRA Research analyst Kenneth Leon maintained a buy rating on HD stocks and called its recent pullback “an improved buying opportunity.”
- Kraft-Heinz (KHC) was a rare touch of green today, with the stock climbing 5.0% after the food company raised its long-term growth targets and reiterated its adjusted EBITDA for fiscal 2022 (earnings before interest , taxes, depreciation and amortization). “Over the past 18 months, KHC has strengthened its product portfolio, reduced leverage and laid the foundation for more profitable growth,” writes Arun Sundaram (Buy), analyst at CFRA Research. “Phase three will seek to use technology and data-driven solutions to accelerate the pace of innovation and use resources more efficiently.”
- Tempur Sealy International (TPX) fell 19.4% after the mattress maker reported earnings. In the fourth quarter, TPX reported adjusted earnings of 88 cents per share on $1.36 billion in revenue, below the 96 cents per share and $1.45 billion expected by analysts. The company also increased its quarterly dividend by 11.1% to 10 cents per share.
What Russia and Ukraine mean for your wallet
While equities face many headwinds this year, military conflict is unlikely to have a lasting effect.
“As devastating as a major conflict between Russia and Ukraine can be, the truth is that equities will likely be able to weather the geopolitical fight,” says Ryan Detrick, chief market strategist at LPL Financial, adding that historically, major geopolitical events are often a “non-event” for US stocks.
But that doesn’t mean there won’t be at least some short-term consequences, as today’s declines clearly signal.
In the near term, for example, commodities of all types should gain further ground – a boon for commodity funds such as those energy exchange-traded funds or gold ETFs.
And you can check out our primer for a broader look at the various ways strategists and analysts see the Russian-Ukrainian conflict playing out in US portfolios.
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