U.S. stocks turned lower Tuesday to start the holiday-shortened week in the red as investors continued to monitor tensions between Russia and Ukraine and await the Kremlin’s next move.

The Dow Jones Industrial Average fell 261 points, or 0.77%, to 33,817.19, while the S&P 500 ticked down 0.40% to 4,331.34. The Nasdaq Composite shed 0.54% to 13,474.33.

Wall Street was closed for trading on Monday in observance of Presidents Day, but investors will return from the long weekend to a series of new developments on the geopolitical front that are likely to extend the recent pressure on stocks.

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Russian President Vladimir Putin authorized the deployment of Russian troops into two breakaway pro-Moscow regions in eastern Ukraine after announcing Monday evening he would recognize their independence.

The move was seen by the West as a provocation and intensified worries a war was underway. Just last week, the Biden administration warned that recognizing the self-declared “People’s Republics” of Donetsk and Luhansk in eastern Ukraine would defy international law and Ukraine’s sovereignty and “necessitate a swift and firm response” from America and its allies.

President Joe Biden signed an executive order Monday imposing sanctions that target the two Russia-backed separatist regions, specifically prohibiting “new investment, trade and financing by U.S. persons to, from, or in” the so-called Donetsk People’s Republic and Luhansk People’s Republic.

In the U.K., Prime Minister Boris Johnson addressing lawmakers in the House of Commons on Tuesday imposed targeted economic sanctions on five Russian banks and three high net-worth individuals in response to the move by Putin.

Prime Minister Boris Johnson said the “first tranche” of sanctions are aimed at Rossiya, IS Bank, General Bank, Promsvyazbank and the Black Sea Bank when addressing lawmakers in the House of Commons on Tuesday.

“There are three different buckets of economic impact of what’s ongoing right now between Russia and Ukraine,” Douglas Rediker, founder of the policy and markets advisory firm Capital Strategies and non-resident senior fellow at the Brookings Institution, told Yahoo Finance Live. “The first is the direct impact of a potential Russian invasion and the disruption of commerce and economic activity on the back of that invasion, the second is sanctions, and the third is if we do put on sanctions what the retaliatory measures might be that Russia might impose on the U.S. and Europe.”

The conflict creates an added headwind for markets already holding its breath in anticipation of the Federal Reserve’s next move as it looks to tighten monetary conditions to mitigate surging inflationary pressures. A war between Russia and Ukraine could exacerbate inflation and spur other economic disruptions.

Robert Schein, chief investment officer of Blanke Schein Wealth Management, argued while the markets have been sensitive to headline risk from Russia-Ukraine tensions, central bank policies remain the most critical concern for investors right now.

“We believe the risk of a Russian invasion of Ukraine is overstated, as war invasions are not typically telegraphed in advance and there is usually an element of surprise, which is clearly not the case with Russia-Ukraine,” Schein said in a note. “Federal Reserve policy remains the market’s biggest risk and investors are hoping that the Fed can engineer a soft landing, which would involve tightening policy just enough to calm rising inflation.”

“The market is in ‘wait and see mode,’ as investors brace for the Federal Reserve’s next move,” he added.

10:46 a.m. ET: Consumer confidence dips for second straight month on economic worries
U.S. consumer confidence declined for the second consecutive month in February, with fewer consumers reporting plans to buy homes, automobiles or go on vacation in the next six months as worries grow over the short-term economic outlook.

The Conference Board reported its consumer confidence index dropped to a reading of 110.5 this month from a downwardly revised 111.1 in January. Economists surveyed by Bloomberg anticipated a print of 110.0 expected.

“Expectations about short-term growth prospects weakened further, pointing to a likely moderation in growth over the first half of 2022,” Lynn Franco, senior director of economic indicators at The Conference Board, said.. “Meanwhile, the proportion of consumers planning to purchase homes, automobiles, major appliances, and vacations over the next six months all fell.”

10:21 a.m. ET: US business activity picks up in February after winter COVID drag
U.S. business activity accelerated during the month of February following a slowdown caused by the winter surge in coronavirus cases.

IHS Markit reported its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services industries, bounced back to a print of 56.0 this month after falling to 51.1 in January.

The data firm said the rise was led by “employees returning from sick leave, increased traveling and greater availability of raw materials.”

A reading above 50 reflects growth in the private sector.

9:30 a.m. ET: Wall Street’s main indexes tick lower amid continued geopolitical pressures
Here were the main moves in markets during Tuesday’s open:

S&P 500 (^GSPC): -19.66 (-0.45%) to 4,329.21

Dow (^DJI): -181.85 (-0.53%) to 33,897.33

Nasdaq (^IXIC): -168.63 (-1.23%) to 13,548.07

Crude (CL=F): +$3.07 (+3.37%) to $94.14 a barrel

Gold (GC=F): +$6.10 (+0.32%) to $1,905.90 per ounce

10-year Treasury (^TNX): +0.4 bps to yield 1.9360%

9:05 a.m. ET: US home price growth hits a lull in the final month of 2021
Home price growth in the U.S. stalled in the last month of 2021, but the full year logged in record gains.

Standard & Poor’s said Tuesday that its S&P CoreLogic Case-Shiller national home price index saw an 18.8% annual gain in December, unchanged from November. The 20-City Composite posted an 18.6% annual gain, up from 18.3% a month earlier. The 20-City results were higher than analysts’ expectations of an 18% annual gain, according to Bloomberg consensus estimates.

“For the year, the National Composite Index recorded a gain of 18.8%. This is the highest calendar year increase in 34 years of data, and substantially ahead of 2020’s 10.4% gain,” said Craig J. Lazzara, managing director and global head of index investment strategy at S&P DJI, in a statement. “The 10- and 20-City Composites rose 17.0% and 18.6%, respectively — a record for the 20-City Composite, and the second-best year ever for the 10-City Composite.”

8:28 a.m. ET: UK unveils ‘first barrage’ of economic sanctions against Russia
The U.K. has imposed targeted economic sanctions on five Russian banks and three high net-worth individuals following a move by President Vladimir Putin to send troops into eastern Ukraine on Monday.

Prime Minister Boris Johnson said the “first tranche” of sanctions are aimed at Rossiya, IS Bank, General Bank, Promsvyazbank and the Black Sea Bank when addressing lawmakers in the House of Commons on Tuesday.

The three “very high net worth” individuals also targeted were Russian billionaires Gennady Timchenko, Boris Rotenberg and Igor Rotenberg, who will be banned from traveling to the country and see U.K. assets frozen as part of the measure.

“This is the first tranche, the first barrage, of what we are prepared to do,” Johnson said. “We will hold further sanctions at readiness, to be deployed alongside the United States and the European Union if the situation escalates still further.”

Prime Minister Boris Johnson updates MPs in the House of Commons in London on the latest situation regarding Ukraine. Picture date: Tuesday February 22, 2022. (Photo by House of Commons/PA Images via Getty Images)
Prime Minister Boris Johnson updates MPs in the House of Commons in London on the latest situation regarding Ukraine. Picture date: Tuesday February 22, 2022. (Photo by House of Commons/PA Images via Getty Images)

8:15 a.m. ET: Macy’s stock jumps after earnings beat, rejection of turnaround plans
Macy’s Inc. (M) reported fourth-quarter results that surpassed analyst forecasts on earnings and sales, appearing unscathed from supply-chain snafus thanks to its strategy to stock up in advance.

Shares of the retailer surged more than 7% ahead of open to trade at $27.50 a piece as of 8:10 a.m. ET.
What happened
Russia invaded Ukraine last night — well, technically, it invaded Ukraine eight years ago, but it invaded a bit more last night — and investors reacted immediately to the news by selling off Russian stocks Tuesday morning.

As of 10:05 a.m. ET:

Russian tech giant Yandex (NASDAQ: YNDX) is down 6%.
Telecom titan Mobile TeleSystems (NYSE: MBT) is down a similar 6%.
Steel producer and iron ore and coal miner Mechel PAO (NYSE: MTL) has plummeted 9.4%.
And online real estate classified advertiser Cian PLC (NYSE: CIAN) is leading the sector lower with a 16.2% decline.
So what
In a rambling televised address on Monday, Russian president Vladimir Putin laid out the case for why, in his opinion, Ukraine doesn’t deserve to be a country. He eventually came to the point an hour in, declaring that Russia acknowledges the “Donetsk People’s Republic” and “Lugansk People’s Republic” — two regions of Ukraine that Russia invaded and occupied with proxy forces in 2014 — as “independent” nations.

And then he sent columns of armored tanks rolling into these new nations to ensure their independence.

International reaction was swift, with members of the United Nations Security Council denouncing the invasion and the United Kingdom, the United States, and the European Union all announcing new economic sanctions against Russia. Of particular note, this morning Germany announced that it is suspending approval of the $11 billion Nord Stream 2 pipeline that Russia built in order to bypass Ukraine when piping out natural gas to sell to Europe.

Map of Russian-Ukrainian border with chess pieces and tanks arrayed on both sides.
Image source: Getty Images.

Now what
What does all of this have to do directly with Yandex and MTS, Mechel and Cian? That remains to be fully seen.

The Western nations that announced sanctions against Russia last night and this morning, targeting primarily Russian banks and high-net-worth officials and oligarchs with direct ties to the occupied Ukrainian regions, have indicated that more sanctions are forthcoming. The full brunt of the sanctions — up to and potentially including delisting Russian stocks from US exchanges, or even cutting off Russia and its companies entirely from the international SWIFT banking system — probably won’t be felt unless and until Russian troops move beyond the occupied territories to attack other parts of Ukraine.

That being said, it’s looking more rather than less likely that those extra sanctions will soon be deployed, with potentially devastating consequences for US-listed Russian stocks. In yesterday’s speech, Putin was far from conciliatory, practically growling his threat into the camera: “You want de-communism-ization [in Ukraine]? Very well, this suits us just fine. But why stop halfway? We are ready to show what real de-communism-ization would mean for Ukraine.”

It seems the war that started with Russia’s invasion of Crimea in 2014, that expanded with the subversion of Donetsk and Lugansk later that year, and that expanded with yesterday’s arrival of armored troops has only just begun.

Source https://www.nasdaq.com/articles/why-russian-stocks-crashed-on-tuesday

By block head

Block Head is a blockchain journalist.