NEW YORK (AP) — Stocks fell again on Friday, and this time bond yields sagged as worries about an impending Russian invasion of Ukraine piled onto Wall Street’s already heavy list of concerns about inflation and interest rates.
The S&P 500 lost 1.9% after the White House encouraged all US citizens to leave Ukraine within the next 48 hours, ahead of possible military action by Russia. The price of oil has increased by more than 3%.
Stocks suddenly fell in the middle of trading, with losses for the S&P 500 nearly tripling in about half an hour. Similar, impulsive swings swept through other markets as investors pulled money out of riskier things like stocks and headed for the safety of bonds and gold instead.
These are just the latest sharp turns in what has already been a tumultuous 2022 for the markets. Wall Street shuddered as it takes aim at a Federal Reserve forced to aggressively scrap the low interest rates investors love, to stave off high inflation.
The S&P 500 fell 85.44 points to 4,418.64 to lock in its first weekly loss in the past three but its fourth in the past six. The Dow Jones Industrial Average lost 503.53, or 1.4%, to 34,738.06, and the Nasdaq fell 394.49, or 2.8%, to 13,791.15.
Tensions have been simmering for some time over possible military action by Russia, and US national security adviser Jake Sullivan said on Friday that the United States does not have definitive information that the president Russian Vladimir Putin had ordered an invasion. But he also said “the threat is now sufficiently immediate that caution dictates that it is time to leave now” for Americans in the country.
Russia is one of the world’s biggest energy producers, and the warnings caused an immediate jolt in oil prices. Brent crude, the international standard, rose 3.3% to settle at $94.44 a barrel amid the possibility that violence could disrupt supplies. U.S. crude rose 3.6% to settle at $93.10 a barrel.
Prices were already rising before Ukraine’s warnings, likely driven by a statement from the International Energy Agency that supplies in the oil market are already tight, said Stewart Glickman, an energy equity analyst at the CFRA.
Gold also rose, gaining nearly $20 in half an hour during the afternoon to hit $1,860 an ounce as investors sought safety.
A similar run for stability also pushed investors into Treasuries, pushing their yields lower. The 10-year Treasury yield fell to 1.91% from around 2.03% Thursday night.
For bond yields, it’s a sharp turnaround after they steadily advanced on expectations that the Fed will raise rates more often and more sharply this year than expected. Just a day earlier, the 10-year yield topped 2% for the first time since 2019.
Forecasts for a more aggressive Fed were upended on Thursday, when an inflation report came in hotter than expected and showed it was at a 40-year high. The Fed can slow the economy and inflation by raising interest rates, something it hasn’t done since 2018, but higher rates also put downward pressure on stocks and other investments.
Goldman Sachs economists have just raised their forecast for rate hikes this year by the Fed to seven from five, for example.
Much of the market volatility at the start of 2022 focused on expectations about what the Fed will do. Besides Thursday’s inflation report, other flashpoints included the release of minutes from a Fed policy meeting that said it may cancel its bond-buying program sooner. provided that.
The market also shook earlier this month after Facebook’s parent company reported surprisingly weak results for its latest quarter. That threatened the belief that continued earnings growth can help stocks weather the downside pressures created by higher rates.
Markets will likely remain volatile as the Fed nears a rate hike.
“What we’re going through is likely to continue in the near term,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.
The prospect of violence in Ukraine only adds more uncertainty, although some on Wall Street have said it will likely end up losing importance for markets.
“You can’t understate what today’s news might mean for this part of the world and the people affected, but from an investment perspective, we must remember that major geopolitical events have historically not not much moves stocks,” Ryan Detrick, chief market strategist at LPL Financial wrote in a research note.
“For example, after the assassination of JFK in November 1963, stocks had one of their best runs in 6 months. The truth is that a strong economy can offset a lot of sins.
AP Business Writer Cathy Bussewitz contributed.