All three major stock indexes finished lower for a third straight trading day on Monday, with the S&P 500 index racking up its biggest three-day drop since October 2020, as U.S. allies warned of an imminent attack by Russian forces on Ukraine.
What did indexes do?
- The Dow Jones Industrial Average DJIA, -0.49% finished 171.89 points, or 0.5%, lower at 34,566.17. It has lost 1,201.89 points, or 3.4%, over the last three trading days.
- The S&P 500 SPX, -0.38% closed down by 16.97 points, or 0.4%, at 4,401.67. It’s lost 185.51 points, or 4%, over the last three trading days — the largest three-day point and percentage decline since the period that ended Oct. 28, 2020, according to Dow Jones Market Data.
- The Nasdaq Composite COMP, -0.00% was marginally lower at 13,790.92. It’s down 699.45 points, or 4.8%, over the last three trading days.
What drove markets?
Investor sentiment shifted throughout the day on Monday amid multiple developments in the Russia-Ukraine crisis.
When trading began Monday morning, worries over Ukraine had appeared to ease somewhat after Russian Foreign Minister Sergei Lavrov suggested continuing talks with the U.S. and its allies over security issues.
But by the afternoon, Secretary of State Antony Blinken said the U.S. was closing its embassy in the Ukrainian capital of Kyiv and relocating operations 340 miles west to Lviv near the Polish border.
Also, it was reported that Ukrainian President Volodymyr Zelensky had said in a Facebook update that Ukraine had learned Wednesday “will be the day of the attack” by Russia. But confusion surrounded the remarks, and his spokesman later walked back the statement, news reports said, saying that Zelensky had only been repeating news reports.
With markets focused on the threat of a Ukraine invasion, RBC Capital Markets told investors that stock-market drops ahead of war tend to resemble “growth scares.” The S&P 500 index fell more than 19% from peak to trough during the 1990 Gulf War, a drawdown associated with a recession that year, according to RBC analysts. And the U.S. stock benchmark’s 33% drop around the second Iraq war in 2003 came as “investors were also wrestling with the aftermath of the Tech bubble, as well as the accounting scandals that marked the early 2000s,” they said.
“On Russia/Ukraine, there’s no past conflict that provides a good template for how low stocks could trade if an invasion occurs,” RBC analysts led by Lori Calvasina, head of U.S. equity strategy, said in a research note Monday. “But we have found it interesting that stock market declines around the two Iraq wars were similar to the kinds of drops we see around recessions” and growth scares.
In central bank developments, St. Louis Fed President James Bullard reiterated his call for the Fed to “front load” rate increases in the face of persistently high inflation. In an interview with CNBC Monday, Bullard said he didn’t think the Fed’s rate moves would sink the economy or deeply unsettle financial markets.
Meanwhile, Kansas City Fed President Esther George said, in an interview with The Wall Street Journal published Monday, said that it’s too soon to say whether a 50-basis-point rate increase is needed in March. She reiterated her call for the Fed to begin selling assets from its nearly $9 trillion balance sheet. George, like Bullard, is a 2022 voting member of the rate-setting Federal Open Market Committee.
Earnings season is moving into its final stretch. Of the 358 companies in the S&P 500 that had reported earnings through Friday, 78.2% reported earnings that came in above analyst expectations, while 18.2% missed forecasts, according to Refinitiv. Over the weekend, Goldman Sachs updated its S&P 500 year-end forecast, dropping it to 4,900 from 5,100, which is still 11% higher than where prices closed Friday.
Need to Know: Goldman Sachs sees three paths for the S&P 500 —and one would leave stocks nearly 20% lower
“With the stock market continuing to be priced at all time highs, even with the recent selloff, any negative events will cause significant volatility in the markets,” Nick Tell, chief executive of Armory Group, said in an email to MarketWatch. “This is a time of great uncertainty and I expect that there will be more downside in asset valuations until we start getting a better sense of what the Fed plans to do or we get a real correction that resets values in line with historical metrics.”
Which companies were in focus?
- Cisco Systems Inc. CSCO, -1.34% made a $20 billion offer for software maker Splunk Inc. SPLK, +9.13%, The Wall Street Journal reported Friday, citing people familiar with the matter. Splunk shares finished 9.1% higher, while Cisco shares fell 1.3% on the day.
- According to a filing with the Securities and Exchange Commission on Friday, the investment fund ran by billionaire George Soros bought nearly 20 million shares of electric-vehicle maker Rivian Automotive Inc. RIVN, +6.46% last quarter, worth about $2 billion at the time. As of Friday’s close, however, the stake was worth about half that — roughly $1.17 billion. Shares finished 6.5% higher on Monday.
- Eli Lilly & Co. LLY, -0.03% said late Friday that the U.S. Food and Drug Administration issued an emergency-use authorization for bebtelovimab, the pharma company’s antibody treatment for COVID-19. Shares closed 0.5% lower.
- Shares of banking app Dave Inc. DAVE, -36.91% finished down by 37% after Marshall Wace LLP said in a regulatory filing Monday that it no longer has a stake in Dave.
What did other assets do?
- Treasury yields, which had pulled back on Friday as investors sought safety in traditional havens amid fears of a potentially imminent Russian invasion of Ukraine, bounced Monday. The yield on the 10-year Treasury note BX:TMUBMUSD10Y rose 4.4 basis points to 2%. Yields and debt prices move opposite each other.
- The ICE U.S. Dollar Index DXY, -0.19%, which tracks the currency against a basket of six major rivals, rose 0.3%.
- West Texas Intermediate crude for March delivery CLH22, -0.56% rose $2.36, or 2.5%, to settle at $95.46 a barrel on the New York Mercantile Exchange. That was the highest front-month contract finish since Sept. 3, 2014. The April gold contract gained $27.30, or 1.5%, to settle at $1,869.40 per ounce.
- The Stoxx Europe 600 SXXP, -1.83% finished 1.8% lower, while London’s FTSE 100 UKX, -1.69% closed down by 1.7%.
- The Shanghai Composite SHCOMP, 0.43% ended 1% lower, while the Hang Seng Index HSI, -0.53% fell 1.4% in Hong Kong and Japan’s Nikkei 225 NIK, -0.27% dropped 2.2%.