Stocks slid on Friday as increased tensions between Ukraine and Russia sent oil spiking and led investors to dump risky assets like equities.
Shares were mostly flat on the day until Ukraine-related headlines in afternoon trading caused traders to dump stocks and buy Treasuries.
The tech-heavy Nasdaq Composite fell nearly 3%, while the S&P 500 was down 2.1%. The Dow Jones Industrial Average dropped 527 points, or 1.5%.
Stocks moved sharply lower in afternoon trading after a jump in oil prices that appeared to be tied to increased concerns about Russia taking military action against Ukraine.
With about 2 hours left to the trading day, U.S. National Security Advisor Jake Sullivan said at a White House briefing that there were signs of Russian escalation at the Ukraine border and that it was possible that an invasion could take place during the Olympics, despite speculation to the contrary.
Both the U.S. and U.K. have called for their citizens to leave Ukraine as soon as possible.
Sullivan noted that the U.S. is not certain that Russian President Vladimir Putin has made a final decision to invade Ukraine. But “it may well happen soon,” he said. Stocks came off their lows and oil and bond prices retreated from their highs of the trading session following that comment from Sullivan, which countered a bit an earlier report that had sent markets reeling
The Ukraine headlines did have a “a little bit” to do with the sell-off, said Art Cashin of UBS. He said some traders would jump on those headlines ahead of the weekend. “I think it’s really because the Fed doesn’t seem to have a plan.”
“I don’t think it’s going to happen,” Cashin said of an invasion. “A rumor without a leg to stand on will find a way to get around.”
Some defense stocks moved higher after Ukraine headlines crossed. Northrop Grumman jumped about 4%. Lockheed Martin added more than 2%.
Energy stocks moves higher alongside the price of oil with the Energy Select Sector SPDR gaining 1.8%. Diamondback Energy rose 2.2% and Devon Energy added 2.6%. Exxon Mobil and ConocoPhillips gained 1.8% and 1.3%, respectively.
Shares of travel stocks like airlines dropped sharply. Shares of American Airlines fell 6%.
Friday’s moves followed a sharp sell-off in bonds and stocks in the previous session. Treasury yields spiked in reaction to data that showed consumer prices surged more than 7% last month, the highest gain since February 1982.
The 10-year Treasury yield on Thursday jumped above 2% for the first time since 2019, while the rate-sensitive 2-year yield soared more than 26 basis points at one point in its biggest intraday move since 2009. The 10-year yield was volatile on Friday, falling below 2% in afternoon trading.
The hotter-than-expected inflation reading prompted St. Louis Fed President James Bullard to call for accelerating rate hikes — a full percentage point increase by the start of July.
However, Fed officials contacted by CNBC’s Steve Liesman said that they don’t expect a 50-basis-point move in March would be appropriate. A basis point is equal to 0.01%, and the Fed typically moves in 25-basis-point increments. The presidents of the Atlanta, Richmond and San Francisco Feds pushed back against the idea of a double hike.
Futures market repriced rate-hike odds as CME data pointed to a 70% chance of a 50-basis-point increase at the March meeting, showing that traders were less confident in a larger hike than they were on Thursday afternoon.
Goldman Sachs shifted its expectations for the Fed this year, calling for seven rate hikes in an effort to cool an economy that has generated inflation far more persistent than policymakers had anticipated.
“The Fed is obviously behind the curve … It’s going to have to raise rates more than the market still thinks,” DoubleLine CEO Jeffrey Gundlach said Friday on CNBC’s “Halftime Report.” “My suspicion is they are going to keep raising rates until something breaks, which always happens.”
Semiconductor stocks, which have been volatile in part due to supply chain issues caused by Covid, were underperformers on Friday. Shares of Advanced Micro Devices and Xilinx fell about 8%.
In earnings news, shares of Newell Brands jumped 11% after the company beat estimates on the top and bottom lines for the fourth quarter. Shares of Under Armour dropped 12% after the apparel company highlighted supply chain issues in its quarterly report.
Shares of Zillow rallied strongly, rising 12% the day after the real estate website operator posted a surprise profit of $1.07 against an expected loss of 42 cents per share.
Despite a slide on Thursday that saw the Dow shed more than 500 points, the major averages are on pace to post their third positive week in a row with modest gains.
“The S&P 500 still trades at 20.0x on [forward price-to-earnings], the lowest level since COVID, but well above the 14-18x range during the prior Fed hiking cycle in 2015-19 and 28% above the historical average of 15.6x. We are not outright bearish given still healthy fundamentals, but we expect the market to remain volatile throughout the year, with so far no signs of inflation easing,” Bank of America’s Savita Subramanian said in a note to clients.
On the economic front, the University of Michigan’s preliminary consumer sentiment reading for February came in at 61.7, falling from 67.2 the previous month and missing expectations.
-CNBC’s Kevin Breuninger contributed to this report.
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