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 /zigman2/quotes/210598065/realtime DJIA +1.05% 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 /zigman2/quotes/210599714/realtime SPX +1.06% fell 79.26 points, or 1.8%, to around 4,225.50, deepening its stumble into correction territory.
The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.90% 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.