Wall Street indexes turned sharply lower yesterday, as news that the United States is closing its Kyiv embassy in Ukraine heightened geopolitical tensions and prompted a sell-off in choppy trading.
All three major indexes fell after the Wall Street Journal reported on the relocation of U.S. diplomatic operations to western Ukraine, in a possible harbinger of an imminent Russian invasion. Ukraine President Volodymyr Zelenskiy urged state officials, politicians, and business leaders who have recently left the country to return within 24 hours to show unity.
Investors don’t like uncertainty, and this is obviously a period of increased uncertainty and that’s why you’re seeing this volatility. Geopolitical anxieties have been simmering in recent weeks as negotiators scrambled to find a diplomatic path forward as Russia massed troops along the Ukrainian border. Recent data showed U.S. inflation at its hottest level in decades, ratcheting up concerns that the Fed could begin hiking key interest rates more aggressively than many had anticipated.
Dow Jones Industrial Average
The Dow Jones Industrial Average fell 0.49%. The biggest gainers of the session on the Dow Jones Industrial Average were Nike Inc., which rose 1.01% or 1.41 points to trade at 141.59 at the close. Walt Disney Company added 0.92% or 1.38 points to end at 150.85 and Coca-Cola Co was up 0.65% or 0.39 points to 60.68 in late trade. The biggest losers included Walgreens Boots Alliance Inc., which lost 2.75% or 1.34 points to trade at 47.36 in late trade. International Business Machines declined 1.91% or 2.54 points to end at 130.15 and Chevron Corp shed 1.54% or 2.14 points to 136.67.
NASDAQ 100
The NASDAQ index lost 0.03%. The top performers on the NASDAQ Composite were BioDelivery Sciences International which rose 52.75% to 5.560, Knightscope Inc. which was up 32.91% to settle at 8.40 and Alpine 4 Holdings Inc. which gained 22.30% to close at 1.81. The worst performers were Dave Inc. which was down 36.91% to 5.88 in late trade, RumbleON Inc. which lost 30.22% to settle at 26.86 and Gravity Co Ltd which was down 26.45% to 45.44 at the close.
Oil
Oil dropped from a seven-year high to around $94 a barrel, pressured by a report that some troops in Russia's military districts adjacent to Ukraine are returning to bases, a move that could de-escalate tension between Moscow and the West.
Russia's Interfax news agency cited the defense ministry as saying that while large-scale drills across the country continued, some units of the Southern and Western military districts have completed their exercises and started returning to base. U.S crude dropped $2.00, or 2.1%, to $93.46.
There are no prizes for guessing the driving force behind this bout of volatility. The Russia-Ukraine crisis has put the energy market on high alert for possible disruptions of Russian energy supplies. Britain's Foreign Secretary Liz Truss said on Tuesday a Russian invasion of Ukraine was highly likely, although Prime Minister Boris Johnson and U.S. President Joe Biden agreed in a call on Monday there was a crucial window for diplomacy.
Investors are also watching talks between the United States and Iran on reviving Tehran's nuclear deal with world powers.
Precious and Base Metals
Gold prices were steady near an eight-month high today, has heightened tensions between Russia and the West over Ukraine prompted investors to shun riskier assets and opt for safe-haven bullion. Spot gold was steady at $1,869.46 per ounce, after hitting its highest level since June 11 at $1,879.48 earlier. U.S. gold futures rose 0.5% to $1,878.00.
Due to the Ukraine crisis, gold is supported through the inflation channel because of higher crude oil prices and through the risk aversion channel because of lower stocks, said Stephen Innes, managing partner at SPI Asset Management. If we lose that Ukraine impulse, then gold comes off quite quickly. Bullion is usually perceived as a hedge against geopolitical conflicts, and with simmering tensions surrounding Ukraine, spot gold has risen about 5% since Jan. 31 and is set for the tenth session of gains in 12.
The (gold) market seems to be ignoring major central banks right now because investors are lost in the fog of war and it becomes very difficult to have a salient macro or fundamental view in this type of market where you really have to just go trade on a hair-trigger.
Further supporting bullion, benchmark U.S 10-year Treasury yields eased, decreasing the opportunity cost of holding non-interest-paying gold, while a slightly weaker dollar helped make the metal more attractive for overseas buyers. If Russia further reduces gas supply into Europe, leading to higher energy prices across the board, that will be a positive for gold. I do however expect gold to top out around $1,920-$1,930 roughly.
Elsewhere, spot silver fell 0.7% to $23.66 per ounce, platinum was down 0.2% to $1,025.81, and palladium dipped 2.4% to $2,303.45. Copper prices, often viewed as a gauge of global economic health, fell on Tuesday as tensions at the Ukrainian border prompted investors to scale back purchases of riskier assets. Three-month copper on the London Metal Exchange (LME) was down 0.4%.
Traditional Agricultures
Corn and wheat ended higher after earlier losses, with corn underpinned by strong export inspections and wheat weighing tensions between Russia and Ukraine that could threaten Black Sea exports. Soybean fell, pressured by rainfall in parts of South America that could refresh parched crops.
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