After enduring steep losses in previous sessions, the Dow popped more than 475 points, or 1.3 percent, in morning trading. The tech-heavy Nasdaq advanced 1.8 percent. All three major US indexes remain down 3 percent or more year to date, according to MarketWatch.
The volatility sparked by the crisis in Ukraine collided with a maelstrom of tensions that have made for a rocky start to 2022 trading: a topsy-turvy labor market, the pandemic’s ceaseless complications, supply chain snarls, the highest inflation in 40 years and uncertain surroundings the Federal Reserve’s path to reining it in.
For the moment, though, markets are “moving in lockstep with headlines from the Russia/Ukraine situation, said David Bahnsen, chief investment officer for The Bahnsen Group.
“Any indication of thawing tensions between Russia and Ukraine is enough to spark a small rally in stocks,” he said Tuesday in comments emailed to The Post, noting that daily movements tied to the crisis are “less relevant than what this situation means for the energy markets” over the next six months.
Bahnsen estimated that the uncertainty surrounding conflict has added $10 to $20 to the price of a barrel of oil in an already strained supply environment. Crude prices slumped in response to the signs of possible de-escalation in Ukraine, with West Texas Intermediate, the US oil benchmark, dropping 3.7 percent to trade around $91.90 per barrel. Brent crude, the international benchmark, slid 3.3 percent to trade around $93.30 per barrel.
Analysts have forecast that prices could exceed $100 a barrel for the first time since 2014 if tensions between Russia and Ukraine escalate further.
Investors have been zeroing in on the potential economic fallout of a Russian invasion. President Biden warned over the weekend that the United States and its allies would respond “decisively and impose swift and severe costs” if Moscow its neighbor. Administration officials insisted any allied response this time will be much harsher than the sanctions imposed following the nation’s 2014 takeover of Crimea.
Russia is one of the world’s biggest oil producers, and military or economic conflict with the country could sow significant disruption in energy markets and beyond. The prospect of tough financial sanctions, probably targeted at Russia’s state-owned banks, is meant to deter a Russian invasion by highlighting the danger of capital outflows, a plunging currency and bank runs. Russian investors already have paid for President Vladimir Putin’s stance: The benchmark RTS stock index is down by about 25 percent since its late-October high.
Overseas markets, which sold off to start the week, also recovered some ground Tuesday. Japan’s Nikkei 225 and Hong Kong’s Hang Seng Index both extended losses, but the Shanghai Composite Index closed 0.5 percent higher.
European indexes saw recovery across the board in midday trading, led by Germany’s DAX, which advanced 1.5 percent. The benchmark Stoxx 600 gained 1.1 percent.
The yield on the 10-year US Treasury note edged higher, again breaking past the 2 percent threshold, in line with recent highs. Bond yields move inversely to prices. Government bonds have seen incredible upward pressure in recent weeks as investors anticipated more aggressive action from the Fed.
Fresh economic data offered another reminder of the hefty costs inflation is laying on businesses and households, with wholesale price increases coming in at twice the expected level in January, the Labor Department reported Tuesday. Wholesale prices leaped 9.7 percent in the past year, the Labor Department said, close to a series record since data collection began in 2010.
Meanwhile, corporate earnings continue to roll out, with big names such as Airbnb, ViacomCBS and Wynn Resorts all scheduled to report after US markets close Tuesday. Corporate earnings have been at the center of recent swings as investors looked for signs of inflation weighing on bottom lines. Other giants such as Nvidia, Walmart, DoorDash are slated to report in the coming days.