[News] Stocks edge lower as investors monitor Russia-Ukraine conflict

[FazzNoth]

 

U.S. stocks were mixed Tuesday to start the holiday-shortened week as investors continued to monitor tensions between Russia and Ukraine and await the Kremlin’s next move.

The S&P 500 and Nasdaq clawed back into positive territory to trade just above the flatline. The Dow Jones Industrial Average recouped some morning losses but was down 132 points at 33,946.56 in the earlier part of the session. 

Wall Street was closed for trading on Monday in observance of Presidents Day, but investors will return from the long weekend to a series of new developments on the geopolitical front that are likely to extend the recent pressure on stocks.

Russian President Vladimir Putin authorized the deployment of Russian troops into two breakaway pro-Moscow regions in eastern Ukraine after announcing Monday evening he would recognize their independence.

The move was seen by the West as a provocation and intensified worries a war was underway. Just last week, the Biden administration warned that recognizing the self-declared "People's Republics" of Donetsk and Luhansk in eastern Ukraine would defy international law and Ukraine's sovereignty and "necessitate a swift and firm response" from America and its allies.

President Joe Biden signed an executive order Monday imposing sanctions that target the two Russia-backed separatist regions, specifically prohibiting "new investment, trade and financing by U.S. persons to, from, or in" the so-called Donetsk People's Republic and Luhansk People's Republic.

In the U.K., Prime Minister Boris Johnson addressing lawmakers in the House of Commons on Tuesday imposed targeted economic sanctions on five Russian banks and three high net-worth individuals in response to the move by Putin.

Prime Minister Boris Johnson said the "first tranche" of sanctions are aimed at Rossiya, IS Bank, General Bank, Promsvyazbank and the Black Sea Bank when addressing lawmakers in the House of Commons on Tuesday.

“There are three different buckets of economic impact of what’s ongoing right now between Russia and Ukraine,” Douglas Rediker, founder of the policy and markets advisory firm Capital Strategies and non-resident senior fellow at the Brookings Institution, told Yahoo Finance Live. “The first is the direct impact of a potential Russian invasion and the disruption of commerce and economic activity on the back of that invasion, the second is sanctions, and the third is if we do put on sanctions what the retaliatory measures might be that Russia might impose on the U.S. and Europe.”

The conflict creates an added headwind for markets already holding its breath in anticipation of the Federal Reserve’s next move as it looks to tighten monetary conditions to mitigate surging inflationary pressures. A war between Russia and Ukraine could exacerbate inflation and spur other economic disruptions.

Robert Schein, chief investment officer of Blanke Schein Wealth Management, argued while the markets have been sensitive to headline risk from Russia-Ukraine tensions, central bank policies remain the most critical concern for investors right now.

“We believe the risk of a Russian invasion of Ukraine is overstated, as war invasions are not typically telegraphed in advance and there is usually an element of surprise, which is clearly not the case with Russia-Ukraine,” Schein said in a note. “Federal Reserve policy remains the market's biggest risk and investors are hoping that the Fed can engineer a soft landing, which would involve tightening policy just enough to calm rising inflation.”

“The market is in 'wait and see mode,' as investors brace for the Federal Reserve's next move,” he added.

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