By 
U.S. stocks were down Tuesday afternoon as investors reacted to Russian President Vladimir Putin’s decision to order troops to breakaway regions of Ukraine, escalating tensions and raising fears of a full-scale invasion.
Markets in the U.S. were closed Monday in observance of the Presidents Day holiday, with trade on Tuesday providing the first opportunity for investors to react to developments in Eastern Europe.
How are stock-index futures performing?
The Dow Jones Industrial Average
DJIA,
-1.09%
dropped 401 points, or 1.2%, to 33,681.
The S&P 500
SPX,
-0.63%
fell almost 31 points, or 0.7%, to about 4,319.
The Nasdaq Composite
COMP,
-0.72%
shed almost 98 points, or 0.7%, to about 13,451.
On Friday, the Dow, S&P 500 and Nasdaq Composite logged a second straight weekly decline. A so-called death cross crystallized in the Nasdaq, a bearish chart pattern.
What’s driving the market?
Sentiment has soured in the U.S. stock market after Putin ordered forces Monday into separatist regions of eastern Ukraine, raising fears that an invasion was about to materialize.
“Military confrontations are scary,” but the market seems to believe the confrontation over Ukraine will be “limited,” said Jeffrey Kleintop, chief global investment strategist at Charles Schwab, in a phone interview Tuesday. “The market reaction is mild relative to a lot of the fears” over potential spillover effects, such as “fears of World War III” or a recession, he said.
President Joe Biden on Tuesday said the U.S. would sanction two Russian banks as well as the country’s sovereign debt, as he blamed Moscow for what he called the beginning of an invasion of Ukraine. That comes after Biden on Monday issued an executive order barring new investment, trade and financing by U.S. persons in the breakaway regions where Russia sent troops.
Russia is a “very small” trading partner with the U.S., said Kleintop.
Meanwhile, officials from the European Union referred to Putin’s latest moves, including the recognition of the independence of the Russian separatist Donetsk and Luhansk regions’ independence, as “a blatant violation of international law.” And Germany took steps to halt certification of the Nord Stream 2 pipeline that’s set to carry natural gas from Russia to Western Europe.
“European leaders might feel compelled to cut off imports of natural gas and oil from Russia, despite the very serious economic pain which this would entail,” said David Kelly, chief global strategist at J.P. Morgan Asset Management, in a note Tuesday. “Putin could, of course, turn off the energy tap himself in reaction to Western sanctions.”
“However, in either case, the long-term consequences for Russia would be very severe as Europeans would likely, belatedly, resolve to never again make themselves energy dependent on the whims of a Russian leader,” according to Kelly.
Stock-index futures plunged overnight in reaction to the Russian moves but steadied somewhat ahead of Tuesday’s opening bell. Equities began the day lower, but saw choppy price action in morning trade, with the S&P 500 and Nasdaq Composite moving between gains and losses before extending their decline in afternoon activity.
Putin has miscalculated “how unified the West is,” according to Craig Columbus, chief executive officer of Columbus Macro, a unit of Boenning & Scattergood that oversees about $1 billion.
“I don’t think Russia is the primary thing that’s weighing on markets,” he said by phone Tuesday. Rather, concerns tied to inflation and a tightening of monetary policy are what’s “driving a recalibration of assets.”
While Putin’s actions have escalated tensions, the moves so far have fallen short of the sort of full-scale invasion that remains the biggest potential worry for investors, said Tom Martin, senior portfolio manager at Globalt, in a phone interview.
Need to Know: JPMorgan says Russia invasion isn’t the No. 1 stock-market threat
Oil prices jumped but have pulled back from highs, while haven-related buying of Treasurys faded, allowing yields to edge higher.
“What we’re seeing is a fairly muted reaction,” Martin said. “At this point it’s back to things like what’s happening with inflation and what do we think the Fed is going to do with regard to that.”
See: Will Fed rate hikes crush the stock market? Here’s why speed matters
Stocks appeared to find support in early trading after a pair of surveys of purchasing managers showed private-sector activity in the U.S. economy picked up last month as the spread of the omicron variant of the coronavirus faded.
A “flash” index of activity by service-oriented companies jumped to 57.5 this month from an 18-month low of 51.1 in January, IHS Markit said. A similar gauge of manufacturers rose to 52.5 in February from 50.5.
Which companies are in focus?
Home Depot Inc.
HD,
-8.60%
reported fiscal fourth-quarter profit and sales that rose above expectations and announced a 15% increase in its dividend. Shares of the home-improvement retail giant fell more than 9%.
Shares of department-store retailer Macy’s Inc.
M,
-4.67%
declined more than 3% after the department store retailer reported fourth-quarter earnings that beat expectations and announced a dividend hike.
What are other assets doing?
The yield on the 10-year Treasury note
TMUBMUSD10Y,
1.940%
rose about 3 basis points to around 1.95%. Yields and debt prices move opposite each other.
The ICE U.S. Dollar Index
DXY,
-0.08%,
a measure of the currency against a basket of six major rivals, was little changed.
Bitcoin
BTCUSD,
+2.28%
rose 2.5% to around $38,116.
Oil futures rose, with the U.S. benchmark
CL00,
+1.63%
up more than 1% at $92.27 a barrel. Gold
GC00,
+0.12%
for April delivery rose 0.4% to settle at $1,907.40 an ounce, the highest settlement for a most-active contract since June, according to FactSet.
The Stoxx Europe 600
SXXP,
+0.07%
closed about 0.1% higher, while London’s FTSE 100
UKX,
+0.13%
also rose 0.1%.
Equities fell sharply in Asia, with the Shanghai Composite
SHCOMP,
-0.96%
dropping 1%, the Hang Seng Index
HSI,
-2.69%
falling 2.7% and Japan’s Nikkei 225
NIK,
-1.71%
giving up 1.7%.
––Mark DeCambre contributed to this article.
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