By Mark DeCambre and Clive McKeef
U.S. stock indexes all closed sharply lower Wednesday, with the Dow industrials narrowly avoiding a slip into correction, as U.S. officials warned that Russian troops were poised to attack Ukraine, raising anxieties among investors, who are also wrangling with changing monetary policy and surging inflation.
How did stock indexes trade?
The Dow Jones Industrial Average (DOW:DJIA) fell 464.85 points, or 1.4%, to end at 33,131.76. A finish below 33,119.69 would mark a 10% decline from the Dow’s Jan. 4 record close , meeting the commonly used definition of a correction.
The S&P 500 index (S&P:SPX) fell 79.26 points, or 1.8%, to around 4,225.50, deepening its stumble into correction territory.
The Nasdaq Composite Index (NASDAQ:COMP) declined 344.03 points, or 2.6%, at 13,037.49, with 12,845.95 representing the level that would represent a bear market for the technology-laden index.
All three benchmarks had been solidly higher earlier Wednesday.
What drove the market?
The Dow barely ended above a level that would have marked its first close in correction in two years, as concerns about conflict in Eastern Europe continued to buffet investor sentiment.
The Associated Press reported that Russian forces arrayed along Ukraine’s borders are “as ready as they can be” for an invasion, if ordered to launch it, citing a senior U.S. defense official in Washington.
U.S. authorities have estimated that Russia has more than 150,000 troops along Ukraine’s borders with Russia and Belarus.
Investors expressed uncertainty about Russia’s incursion in Ukraine on Tuesday. Market participants have been on edge after Russian President Vladimir Putin ordered forces into separatist regions of eastern Ukraine, raising fears that a full-scale invasion was about to materialize.
“If Russia de-escalates…by simply recognizing two breakaway states, the economic and market impact could be similar to Crimea in 2014: limited sanctions and by extension limited economic fallout,” wrote Lauren Goodwin, economist and portfolio strategist at New York Life Investments, in a note.
“If Russia goes deeper into Ukraine, the conflict could be longer and the West’s reaction could be more severe. As a result, sanctions could be more biting, with likely consequences for Russia’s political and economic system as well as for ex-Russian companies required to navigate those sanctions,” Goodwin said.
“Higher commodity prices and slower growth could have a meaningful impact on the global economy, including emerging market economies and by making the Fed’s job even more difficult,” the money manager said.
The continuing geopolitical tensions between Moscow and Kyiv suggest that volatility will continue to color the investment landscape.
Some strategists were advocating for putting the recent downturn in the market into perspective.
Investors “need to ask themselves ‘will stock markets be higher than this when I retire? Looking at financial market history, the answer is probably ‘yes’, if they have a decade or more ahead of them,” said Nigel Green of financial advisory and asset management firm deVere Group.
Meanwhile, a more infectious subvariant of omicron, BA.2, has surged to account for more than a third of global COVID-19 cases, adding to the debate about whether countries are ready for full reopening, and contributing to concerns about the broader economic rebound taking hold.
The geopolitical risks and worries about COVID have investors wrestling with the outlook for the business environment, with the Federal Reserve set to embark on a rate-raising cycle, starting as soon as next month, to tamp down surging inflation.
Meanwhile, San Francisco Fed President Mary Daly said Wednesday that the economy doesn’t have to experience a severe recession like the late 1970s and early 1980s just because inflation has returned to 40-year highs.
“Now inflation is high again and many are concerned that we could soon be facing another long and painful period, followed by another long and painful correction. But that is not what I see,” Daly said in a speech to the Los Angeles World Affairs Council.
Which companies were in focus?
Shares of Kodiak Sciences Inc. KOD finished down over 80% Wednesday after the biopharmaceutical company said a Phase 2b/3 trial of its treatment for age-related macular degeneration failed to meet its primary efficacy endpoint.
Nucor Corp . NU said Wednesday that Chief Financial Officer Jim Frias will retire, after 12 years in the role and 31 years at the steelmaker. Its stock ended down 0.6%.
TJX Cos. TJX stock sank 4.2% Wednesday after the off-price retailer, and parent of TJ Maxx, reported fourth quarter profit and sales that missed expectations.
Shares of Lowe’s Companies LOW levitated about 0.3% after the home-improvement retailer reported fiscal fourth-quarter profit and sales that beat expectations, and provided an upbeat full-year earnings outlook.
Virgin Galactic Holdings Inc .’s (NYS:SPCE) stock rallied 3.5% on Wednesday after the company reassured investors it was on track to fly space tourists this year and to ready its next generation of spaceships.
Shares of online retailer Overstock.com (NAS:OSTK) closed up 23% higher after the company beat earnings expectations.
How did other assets fare?
The yield on the 10-year Treasury note TMUBMUSD10Y rose 2.9 basis points to 1.976%, pulling back after approaching 2% intraday. Yields and debt prices move opposite each other.
The ICE U.S. Dollar Index DXY , a measure of the currency against a basket of six major rivals, was up 0.2% at 96.187.
Bitcoin BTCUSD rose 2% to $38,027.
Oil futures rose, with West Texas Intermediate crude CL00 settling 19 cents, or 0.2%, higher at $92.10 a barrel on the New York Mercantile Exchange. Gold GC00 for April delivery ticked up 0.2% to settle at $1,910.40 an ounce, marking the highest settlement for a most-active contract since January 2021, according to FactSet.
In Asia, the Hang Seng (HONG:HK:HSI) in Hong Kong gained 0.6% and China’s Shanghai Composite Index (SHG:CN:SHCOMP) rose 0.9%. Japanese markets were closed for a holiday.