By Christine Idzelis and Mark DeCambre
U.S. stocks closed lower Friday, with all three major benchmarks booking a second week of losses, as investors monitored developments between Russia and Ukraine amid fears of a war breaking out.
U.S. markets will be closed on Monday in observance of Presidents Day.
How did stock benchmarks perform?
The Dow Jones Industrial Average (DOW:DJIA) dropped 232.85 points, or 0.7%, to close at 34,079.18.
S&P 500 index (S&P:SPX) fell 31.39 points, or 0.7%, to end at 4,348.87, with information technology (S&P:XX:SP500EW.45) the worst performer among the index’s 11 sectors.
The Nasdaq Composite Index (NASDAQ:COMP) declined 168.65 points, or 1.2%, to finish at 13,548.07. A so-called death cross crystallized in the index, a bearish chart pattern.
For the week, the Dow dropped 1.9%, the S&P 500 fell 1.6% and the Nasdaq declined 1.8%.
On Thursday , the Dow dropped 622.24 points, or 1.8%, to close at 34,312.03, its largest one-day point and percentage drop since Nov. 30. The S&P 500 (S&P:SPX) slumped 94.75 points, or 2.1%, to finish at 4,380.26. The Nasdaq Composite (NASDAQ:COMP) tumbled 407.38 points, or 2.9%, to finish at 13,716.72. Losses for the S&P 500 and Nasdaq were the largest since Feb. 3.
What drove the market?
Renewed fears of a Russian invasion of Ukraine added to weekly losses for markets for buyers on Friday.
“Geopolitical headlines surrounding the tensions in Ukraine with Russia and the rest of the world throughout the West clearly have been impacting investor sentiment,” said Kei Sasaki, senior investment portfolio manager at Northern Trust Wealth Management, in a phone interview Friday. Geopolitical events are “very difficult” to predict, he said, with continuing “anxiety” over the potential for a Russian attack on Ukraine.
President Joe Biden is scheduled to speak at 4 p.m. Eastern Time on the U.S.’s “continued efforts to pursue deterrence and diplomacy, and Russia’s buildup of military troops on the border of Ukraine,” the White House said Friday. Diplomatic efforts aimed at heading off an invasion remained in focus, with Biden also expected to speak with European leaders.
Concerns about conflict have intensified after U.S. and NATO officials said evidence on the ground showed Russia had increased troop levels near Ukraine’s borders despite Moscow announcing earlier in the week that some units were pulling back, while Biden has said the probability of an attack in coming days remains high.
U.S. State Department spokesman Ned Price said late Thursday that U.S. Secretary of State, Antony Blinken, and Russian Foreign Minister Sergei Lavrov would meet late next week, “provided there is no further Russian invasion of Ukraine,” according to news reports .
Blinken said Friday that he is “deeply concerned” that Russia isn’t embarked on the path of diplomacy and that Russia appears to be creating false provocations in Ukraine designed to spark a conflict with Ukraine.
U.S. equity futures had edged up overnight after Lavrov agreed to meet Blinken.
U.S. stocks were undermined for a second week by the standoff between Russia and the West over Ukraine, as well as the prospect of tighter Federal Reserve monetary policy.
Northern Trust’s Sasaki said he’s been looking for buying opportunities amid investors’ knee-jerk reactions to headlines surrounding Ukraine, with a preference for higher quality stocks in developed markets. Geopolitical tensions, so far, haven’t changed his fundamental views on inflation or the prospect for rising rates, which have been core issues for the market, he said.
Bets on a sharper Fed interest-rate rise in March eased somewhat in light of the threat of military conflict, but investors remained concerned by the question of how markets will cope as fiscal and monetary stimulus ebbs.
St. Louis Federal Reserve President James Bullard, who has called for more aggressive rate increases than his colleagues, on Thursday said too m uch “mindshare” has been devoted to the idea that inflation will moderate at some point.
On Friday, president of the New York Federal Reserve, John Williams , said it would be “appropriate” to raise the central bank’s benchmark short-term interest rate in March and begin to reduce its $9 trillion stockpile of bonds “later this year.”
Also on Friday , Chicago Fed President Charles Evans said he sees no need for extra restrictive rate hikes, which triggered past recessions, in remarks to the U.S. Monetary Policy Forum.
In U.S. economic data, existing-home sales increased by nearly 7% between December and January, hitting a seasonally-adjusted, annual rate of 6.5 million, the National Association of Realtors said Friday. Economists polled by MarketWatch expected the pace of home sales to come in at 6.1 million.
Separately, an index of leading economic indicators for the U.S. fell 0.3% in January on surging omicron cases, high inflation and persistent supply-chain disruptions. The decline in the index was the first since last spring. Wall Street had expected a small increase. The LEI is a weighted gauge of 10 indicators designed to signal business-cycle peaks and valleys.
Leading economic indicators “did disappoint this morning,” Sasaki said. He expects U.S. economic growth will “remain positive” this year, but that it will be slower and “more sustainable.”
The market should do “just fine” in 2022 even with expected rate hikes from the Fed, as stocks will be supported by “positive earnings growth,” according to Steven Violin, a portfolio manager at F.L.Putnam Investment Management Company.
As for buying opportunities in U.S. equities, the shift into value from growth “is pretty well advanced,” said Violin, in a phone interview Friday. “Some growth stocks have declined enough to become attractive,” he said, “and some value stocks have appreciated enough to become unattractive.”
Shares of the iShares S&P 500 Growth ETF (PSE:IVW) are down around 13.5% this year, while iShares S&P 500 Value ETF (PSE:IVE) has declined about 3.2%, according to FactSet.
In Violin’s view, “there seems to be a lot more runway for value stocks outside the United States.”
Which companies were in focus?
Roku Inc. (NAS:ROKU) reported earnings Thursday that topped Wall Street forecasts but fourth-quarter revenue that didn’t. The company also warned of continuing supply-chain disruptions. Shares fell about 22.3%.
Shares of DraftKings Inc. (NAS:DKNG) dropped 21.6% as the online betting company’s upbeat forecast on profitability in 2023 was overshadowed by a wider-than-expected projected loss in 2022 as competition in online sports gambling intensifies.
Shares of Ford Motor Co. (NYS:F) rose 2.9% amid reports that it is considering separating its electric-vehicle operation from its legacy car and truck manufacturing, a move seen boosting its competitiveness against singularly EV-focused makes such as Tesla Inc . (NAS:TSLA) , according to a Bloomberg News report Friday. Tesla’s shares fell 2.2%.
How did other assets fare?
The yield on the 10-year Treasury note TMUBMUSD10Y fell 4.2 basis points Friday to 1.93%. For the week, the yield fell 2.1 basis points. Yields and debt move opposite prices.
The ICE U.S. Dollar Index DXY , a measure of the currency against a basket of six major rivals, edged up 0.3%.
In Asia, the Shanghai Composite SHCOMP rose 0.7% and booked a 0.8% weekly advance. The Hang Seng Index HSI declined 1.9% in Hong Kong for a 2.3% drop for the week. Japan’s Nikkei 225 NIK fell 0.4% on the session for a 2.1% weekly decline.
– –Clive McKeef contributed to this article.