U.S. stock market futures were slightly higher in overnight trading on Tuesday after the S&P 500 closed in correction territory amid escalating tensions between Russia and Ukraine.
Futures contracts linked to the Dow Jones Industrial Average advanced 85 points. S&P 500 futures gained 0.35%, while Nasdaq 100 futures rose 0.5%.
In regular trading, the Dow Jones fell 483 points, or 1.42%, for its fourth consecutive negative session. At one point, the benchmark for the 30 stocks had lost more than 700 points. The S&P 500 lost 1.01% and now sits 10.25% below its record close on Jan. 3, putting the broad stock index in correction territory. The Nasdaq Composite fell 1.23% for its fourth consecutive negative session.
On Tuesday afternoon, President Joe Biden announced a first round of sanctions against Russia. The measures target Russian banks, the country’s sovereign debt and three individuals.
“Although uncertainties remain, our work shows that historically, military/crisis events tend to inject volatility into markets and often cause a short-term decline, but stocks tend to rebound unless the event pushes the economy into recession,” Eylem Senyuz, senior global macro strategist at Truist wrote in a note to clients.
“Investor sentiment also suggests the bar for positive surprises is low,” the company added.
All 11 sectors of the S&P 500 fell on Tuesday, dragged down by consumer discretionary stocks, which fell 3%. Energy stocks fell despite a jump in oil prices. International benchmark Brent traded as high as $99.50 a barrel. West Texas Intermediate crude futures, the US oil benchmark, hit a session high of $96, a price last seen in August 2014.
“The risk of contagion will completely fuel inflationary pressures as energy costs soar and this will derail much of the economic recovery from Covid,” said Ed Moya of Oanda.
“Geopolitical risks could lead to a slower growth cycle and this could eliminate the risk of a half-point Fed rate hike at the March 16 FOMC decision,” he said. added.
Wall Street is betting there’s a 100% chance of a rate hike at the Federal Reserve’s March meeting, according to CME Group’s FedWatch tool. With inflation soaring, calls for a 50 basis point hike at the March meeting had accelerated.
With rising tensions between Russia and Ukraine, yields retreated, with the yield on the benchmark US 10-year Treasury falling below 2% as investors seek safe-haven assets.
On Friday, 78% of S&P 500 companies that said they beat earnings estimates, while 78% beat revenue expectations, according to FactSet data.