US Shares Turn Negative As Market Sentiment Sours

Wall Street dips into the red as risk appetite fades. The disappointment on the Ukraine – Russia talks and COVID-19 in China have soured sentiment.

US markets have dropped into negative territory after having opened with gains on Monday. The fragile appetite for risk witnessed during the European session seems to have faded as hopes of a cease-fire in Ukraine dissipate with the increment of COVID-19 cases in China raising alerts.

Expectations of any improvement in the Eastern European crisis have been hammered by the news that China is willing to supply arms to Russia, reported by a NATO official. Russia has continued bombing Ukrainian cities and according to a local governor, killing nine civilians on an attack on a TV tower in Northern Ukraine.

Chinese authorities have reported 3.400 new COVID-19 infections on Sunday. This is the largest outbreak in the last two years which is forcing to close schools and cancel activities, raising concerns about a new round of restrictions.

Against this backdrop, the S&P 500 Index dives 0.78% after having appreciated nearly 1% on early trading, the Nasdaq index drops 1.8%, the Dow Jones ticks 0.2% down.

US stocks were lower in afternoon trading Monday, led by a more than 1% drop in the Nasdaq, as investors sold tech and big growth names and put their focus on this week’s Federal Reserve meeting.

Developments in the Ukraine-Russia conflict kept investors cautious as Russian and Ukrainian delegations held a fourth round of talks on Monday, but no new progress was announced, while Russian forces allowed a first convoy of cars to escape Ukraine’s besieged port of Mariupol.

Investors expect the Fed to hike interest rates for the first time in three years on Wednesday following its two-day meeting as worries about sharply higher energy and other costs rise.

Rotation into value and away from growth, and a lot of that is tied to what is happening to interest rates. Equity markets are going to be challenged going forward, and today is yet another example of that. The technology sector was the biggest drag on the S&P 500, followed by consumer discretionary.

Apple Inc shares were down more than 2% after its supplier Hon Hai Precision Industry Co Ltd, known as Foxconn, suspended operations in China’s Shenzhen amid rising COVID-19 cases.

The Dow Jones Industrial Average (.DJI) fell 43.05 points, or 0.13%, to 32,901.14, the S&P 500 (.SPX) lost 30.22 points, or 0.72%, to 4,174.09 and the Nasdaq Composite (.IXIC) dropped 233.76 points, or 1.82%, to 12,610.05. The CBOE volatility index (.VIX), also known as Wall Street’s fear gauge, rose.

Energy sector shares slid, as Brent crude fell below $110 a barrel, just a week after it scaled as much as $139 due to the Ukraine crisis. Oil and other commodity prices have shot up during the Ukraine-Russia conflict amid tough Western sanctions against Russia. Financial shares gained with a jump in US Treasury yields.

Declining issues outnumbered advancing ones on the NYSE by a 3.26-to-1 ratio; on Nasdaq, a 3.05-to-1 ratio favored decliners.

The S&P 500 posted 11 new 52-week highs and 29 new lows; the Nasdaq Composite recorded 21 new highs and 533 new lows.