US Equities Slide Amid Concerns On Western Sanctions

US equities are sharply lower on Tuesday’s US session as investors express concerns and fret about the global economic impact of the West’s harsh sanctions against Russia.

Russians intensified bombardment of Ukrainian cities. Commodity prices, including crude oil, natural gas and wheat, surged on Tuesday, igniting further concerns about longer-lasting inflationary pressures in the US and Europe.

Economists and investors have renewed the talk about stagflation. Amid the growing wall of worries traders and investors are encountering, the S&P 500 fell back towards the 4300 level, a drop of more than 1.5% on the day.

Similarly, the Nasdaq 100 index fell back to the 14K area to post a drop of more than about 1.6%, despite a sharp drop in yields as investors sought safety in US government debt markets and revised lower US growth/Fed tightening expectations.

The drop in yields weighed heavily on the Dow, which is more heavily weighted to cyclical/more economically sensitive stocks (which can have a positive correlation yields). The index was last also down more than 1.7%, in tandem with its peers.

The language adopted by regional Fed Presidents including Loretta Mester and Raphael Bostic on Tuesday highlights that the Fed is aware of upside inflation risks as well as downside growth risks as a result of the Russia-Ukraine war.

But Fed’s policymakers signalled that the the US central bank’s path remains towards the removal of policy support and tend to tightening.

US ISM Manufacturing PMI survey data for February was out on Tuesday and showed a stronger than expected pick up in activity on the month as Covid-19 infection rates subsided.

The US economy is accelerating, but the state of uncertainty will be relatively short-lived and it would not be a surprise if the market found its footing, sometime over the next couple of weeks when clarity is restored.