U.S. Stocks May Lack Direction Amid Focus On Ukraine

The major U.S. index futures are currently pointing to a roughly flat open on Monday, with stocks likely to show a lack of direction after falling sharply over the two previous sessions.

Traders may be reluctant to make significant moves as they keep a close eye on developments regarding the tensions between Ukraine and Russia.

President Joe Biden spoke with Russian President Vladimir Putin over the weekend, with a senior administration official describing the call as “professional and substantive” but noting there was “no fundamental change in the dynamic that has been unfolding now for several weeks.”

“We believe that we have put ideas on the table that would be in our and our allies’ interest to pursue, that would enhance European security, and that would also address some of Russia’s stated concerns,” the official said in a call with reporters.

The official added, “But it remains unclear whether Russia is interested in pursuing its goals diplomatically as opposed to through the use of force.”

Russian Foreign Minister Sergey Lavrov told Putin in remarks aired on Russian state television on Monday that “there is always a chance” that diplomacy could still work.

A lack of major U.S. economic data may also keep traders on the sidelines ahead of the release of reports on producer prices, retail sales, industrial production and housing starts in the coming days.

The minutes of the Federal Reserve’s latest monetary policy meeting may also attract attention later this week, as traders look for additional clues about the outlook for interest rates.

Stocks moved sharply lower over the course of the trading day on Friday, extending the sell-off seen on Thursday. The major averages fluctuated early in the session but showed a substantial move to the downside as the day progressed.

The major averages all posted steep losses on the day, with the tech-heavy Nasdaq leading the way lower. While the Nasdaq plummeted 394.49 points or 2.8 percent to 13,791.15, the Dow slumped 503.53 points or 1.4 percent to 34,738.06 and the S&P 500 tumbled 85.44 points or 1.9 percent to 4,418.64.

With the sell-off offsetting the strong upward move seen on Tuesday and Wednesday, the major averages posted notable losses for the week. The Dow slid by 1 percent, while the Nasdaq and the S&P 500 dove by 2.2 percent and 1.8 percent.

The substantial weakness that emerged on Wall Street came amid concerns about a potential Russian invasion of Ukraine.

During a press briefing, White House national security adviser Jake Sullivan suggested a Russian invasion could occur during the Winter Olympics currently being held in Beijing.

Sullivan also said any Americans in Ukraine should leave the country in the next 24 to 48 hours, reiterating a plea President Joe Biden made on Thursday.

The U.K. Foreign Office has also urged British citizens to get out of Ukraine as Russia has amassed more than 100,000 troops near the border.

Earlier in the day, uncertainty about the outlook for interest rates led to choppy trading on Wall Street following comments from several Federal Reserve officials.

In an interview with Bloomberg News on Thursday, St. Louis Fed President James Bullard indicated he supports raising interest rates by a full percentage point by the start of July, including a possible 50-basis point hike.

“I was already more hawkish but I have pulled up dramatically what I think the committee should do,” said Bullard, who is a voting member on the Federal Open Market Committee this year.

Bullard’s comments came after a report from the Labor Department showed consumer prices spiked by the highest annual rate in 40 years in January.

However, other Fed officials have subsequently pushed back against the idea of raising rates by 50 basis points at the next Fed meeting in mid-March.

Atlanta Fed President Raphael Bostic told CNBC he still favors a 25-basis point increase in March, while Richmond Fed President Tom Barkin said he would “have to be convinced” of the need for a 50-basis-point rate hike.

San Francisco Fed President Mary Daly also said a 50-basis-point hike is “not my preference,” according to CNBC’s Steve Liesman.

Semiconductor stocks showed a substantial move to the downside as the day progressed, dragging the Philadelphia Semiconductor Index down by 4.8 percent.

Considerable weakness also emerged among airline stocks, resulting in a 4.2 percent nosedive by the NYSE Arca Airline Index.

Software stocks also saw considerable weakness on the day, as reflected by the 3 percent slump by the Dow Jones U.S. Software Index.

Retail, chemical and networking stocks also showed notable moves to the downside, while gold stocks soared as the price of the precious metal spiked in electronic trading. Energy stocks also bucked the downtrend amid a sharp increase by the price of crude oil.

Commodity, Currency Markets

Crude oil futures are falling $0.45 to $92.65 a barrel after soaring $3.22 to $93.10 a barrel last Friday. Meanwhile, after rising $4.70 to $1,842.10 an ounce in the previous session, gold futures are climbing $16.20 to $1,858.30 an ounce.

On the currency front, the U.S. dollar is trading at 115.47 yen versus the 115.42 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1322 compared to last Friday’s $1.1350.

Asia

Asian stocks fell broadly on Monday, with Russia-Ukraine tensions and the prospect of rapidly rising interest rates keeping investors nervous.

Geopolitical tensions ticked higher after the United States said Russia could invade Ukraine at any time and may create a surprise pretext for an attack.

A surge in global oil prices exacerbated concerns about inflation and monetary policy tightening in the Unites States and elsewhere.

China’s Shanghai Composite Index fell 34.07 points, or 1 percent, to 3,428.88, while Hong Kong’s Hang Seng Index ended down 350.09 points, or 1.4 percent, at 24,556.57.

Japanese shares lost the most in three weeks as risk aversion gripped investors. The Nikkei 225 Index plunged 616.49 points, or 2.2 percent, to 27,079.59, marking its biggest daily percentage drop since January 27 and touching below the 27,000 level for the first time since January 31. The broader Topix closed 1.6 percent lower at 1,930.65.

Tech majors as well as heavyweights such as SoftBank Group and Fast Retailing led losses, while oil explorers rose sharply, tracking higher crude prices. Tire maker Bridgestone was the worst performer in the Nikkei, closing down nearly 9 percent.

Australian markets bucked the weak trend to end slightly higher, as a jump in oil prices on fears of a possible invasion of Ukraine by top energy producer Russia helped lift energy stocks.

The benchmark S&P/ASX 200 Index rose 26.60 points, or 0.4 percent, to 7,243.90 after having fallen 1 percent in the previous session. The broader All Ordinaries Index edged up 19.30 points, or 0.3 percent, to 7,535.10.

Woodside Petroleum and Santos surged around 4 percent as oil prices soared to their highest in more than seven years on supply worries. Beach Energy jumped 9.4 percent after its first-half earnings beat forecasts.

Gold miners also ended sharply higher after the precious metal touched a three-month high in the previous session.

Seoul stocks posted their biggest decline in 2-1/2 weeks due to concerns over rising inflationary risks and escalating tensions surrounding Ukraine. The Kospi slumped 43.23 points, or 1.6 percent, to 2,704.48.

Chip giant Samsung Electronics declined 1.6 percent, internet conglomerate Naver gave up 1.7 percent and battery maker LG Energy Solution lost 3.9 percent.

Europe

European stocks have moved sharply lower on Monday as rising tensions between Russia and Ukraine spark nervousness at the start of the week.

The United States on Sunday said Russia might create a surprise pretext for an attack, as it reaffirmed a pledge to defend “every inch” of NATO territory.

Ukrainian Ambassador to the U.K. Vadim Prystaiko said in an interview with the British Broadcasting Corporation that Kiev could drop its position on joining the NATO bloc if the move helps avert a war with Russia.

While the U.K.’s FTSE 100 Index has tumbled by 1.4 percent, the German DAX Index is down by 2 percent and the French CAC 40 Index is down by 2.5 percent.

Banks have led the losses, with Commerzbank falling sharply after Germany’s finance minister said the government would not keep its stake in the lender in the long run.

Spain’s BBVA has also moved notably lower after announcing it would invest $300 million (about €263 million) in Neon, a Brazilian digital bank founded in 2016.

Clariant shares have also plummeted. The Swiss specialty chemicals group delayed the release of its 2021 results as investigators probe whistleblowers’ allegations.

Chemicals company Synthomer has also shown a significant move to the downside after warning of subdued demand in a key rubber unit.

Meanwhile, precious metals miner Fresnillo has jumped as bullion prices hit the highest since November 19 at over $1,865 an ounce.

U.S. Economic Reports

No major U.S. economic data is scheduled to be released today.

Stocks In Focus

Shares of Aerojet Rocketdyne (AJRD) are seeing pre-market weakness after Lockheed Martin (LMT) scrapped plans to acquire the rocket engine maker for $4.4 billion amid opposition from antitrust regulators.

Meat and poultry producer Tyson Foods (TSN) may also move to the downside after Barclays downgraded its rating on the company’s stock to Equal Weight from Overweight amid valuation concerns.

On the other hand, shares of Splunk (SPLK) are moving sharply higher in pre-market trading after a report from the Wall Street Journal said Cisco Systems (CSCO) has offered to acquire the cloud software company for more than $20 billion.