The stock market is always in a very polarizing state, irrespective of whether the sentiment per time is bullish or bearish.
The growing tensions between Russia and Ukraine have escalated and it has stirred the current slump in the United States stock market.
The market that was relatively flat for the better part of Friday experienced what looks like an abrupt sell-off when news about the possible invasion of Ukraine started making the rounds. The Dow Jones Industrial Average (INDEXDJX: .DJI) dropped 1.43% atop a 503.53 points loss to 34,738.06.
While the S&P 500 Index (INDEXSP: .INX) slumped 1.90% to 4,418.64, the tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) recorded a massive drop by 2.78% to 13,791.15. The small-cap stock market index that makes up the smallest 2,000 stocks, Russell 2000 Index (INDEXRUSSELL: .RUT) took a 1.02% hit to 2,030.15.
American leaders, particularly National Security Advisor Jake Sullivan said in a White House briefing that the chances of Russia invading Ukraine are high, and Americans in the region have been urged to exit so as not to be caught in the crosshairs.
Investors were unwilling to let the feud materialize before they stay in the clear, and as such, many choose to exit risky assets. How much the fall will go is unclear, but it seems investors are all braced up for any eventual uncertainties.
“Its conceivable equities see another pullback in the 10.0% range as investors sell first and ask questions later. Growth and defensives will likely outperform initially, yet we suspect value and cyclicals are best positioned for the global cyclical recovery,” said John Lynch, chief investment officer at Comerica Wealth Management. “We encourage investors to adhere to long-term strategies during near-term volatility.”
Among the stocks that took the hit were airlines and travel stocks with Expedia Group Inc (NASDAQ: EXPE) dropping 2.73% to $192.12. Amidst the tensions, investors backing military and defense stocks doubled down on their accumulation with American aerospace, arms, defense, information security, and technology corporation, Lockheed Martin Corporation (NYSE: LMT) surged 2.79% to $396.19.
Stock Market Slumps and the Place of Interest Rate Hikes
The stock market is always in a very polarizing state, irrespective of whether the sentiment per time is bullish or bearish. Amidst the ongoing market slump, inflation has been trending higher forcing St. Louis Fed President James Bullard to call for accelerating rate hikes, a full percentage point increase by the start of July according to a CNBC report.
While caution is billed to be exercised in the pace and timing of the rate hike, analysts from Goldman Sachs Group Inc (NYSE: GS) are expecting the Feds to initiate a seven-rate hike until the economy is stabilized.
“The Fed is obviously behind the curve … It’s going to have to raise rates more than the market still thinks,” DoubleLine CEO Jeffrey Gundlach said Friday on CNBC’s “Halftime Report.” “My suspicion is they are going to keep raising rates until something breaks, which always happens.”