U.S. stock market futures were modestly higher in overnight trading Tuesday after the S&P 500 closed in correction territory amid escalating tensions between Russia and Ukraine.
Futures contracts tied to the Dow Jones Industrial Average rose 85 points. S&P 500 futures gained 0.35%, while Nasdaq 100 futures gained 0.5%.
Transparent regular transactions The Dow fell 483 points, or 1.42%, for the fourth straight negative session. At one point, the benchmark of 30 stocks fell more than 700 points. The S&P 500 is down 1.01% and is now 10.25% below its January 3 close, sending the broad market index into a correction. The Nasdaq Composite fell 1.23% for the fourth straight negative session.
On Tuesday afternoon, President Joe Biden announced the first round of sanctions against Russia. The measures target Russian banks, the country’s sovereign debt and three individuals.
“While uncertainties remain, our work shows that historical military/crisis events tend to introduce volatility into markets and often trigger short-term declines, but stocks eventually tend to recover unless that event pushes the economy into a recession,” Eylem Senyuz, senior global macro strategist at Truist wrote in a note to clients.
“Investor sentiment also suggests a low level of positive surprise,” the company added.
All 11 S&P 500 sectors fell on Tuesday, leading to a decline in consumer discretionary stocks, which fell 3%. Energy shares fell despite rising oil prices. International benchmark Brent crude traded at a high of $99.50 per barrel. West Texas Intermediate crude oil futures, the US benchmark, hit an intraday high of $96, a price last seen in August 2014.
“The risk of outright contagion will increase inflationary pressures as energy costs will soar and that will weigh on much of the economic recovery of Covid,” said Ed Moya of Oanda.
“Geopolitical risks could lead to a slower growth cycle and that could eliminate the risk of the Fed raising rates by half a point following the FOMC March 16 decision,” he added.
Wall Street is betting that there is a 100% chance of a rate hike at the Federal Reserve’s March meeting, according to CME Group’s FedWatch Tool. With inflation heating up, calls for a 50 basis point increase at the March meeting were accelerated.
As tensions mounted between Russia and Ukraine, yields fell, with yields on the benchmark 10-year US Treasuries falling below 2% as investors sought safe-haven assets.
As of Friday, 78% of S&P 500 companies reported topping earnings estimates, while 78% beat revenue expectations, according to data from FactSet.