Fear Eases in Markets, Even as Ukraine Invasion Continues

February 25, 2022

NEW YORK — Some relief flowed through Wall Street on Friday, even as deadly attacks continued to rage in Ukraine. Stocks held relatively steady, oil fell and investors turned away from gold and other traditional havens they favor when fear is high.

The S&P 500 was 0.7% higher in early trading, following up on a wild Thursday where the benchmark index careened from a 2.6% loss to a gain of 1.5%. Stocks have swung sharply with uncertainty about how much Russia’s invasion will push up inflation, particularly oil and natural gas prices, and drag on the global economy.

Such big swings are likely to continue in the hours and weeks ahead, with so much uncertainty not only about Ukraine but also about interest rates. The Federal Reserve is caught in a delicate dance where it has to raise interest rates enough to rein in high inflation but not so much as to cause a recession.

On Friday morning, at least, the mood was calmer. A measure of fear on Wall Street, which shows how worried traders are about upcoming swings in stock prices, eased by 3%. Gold fell 1.8% after rallying for weeks on worries about Russia and Ukraine. Treasury yields inched higher, signaling investors weren’t scrambling for safety as they had immediately after Russia’s invasion.

Reports that Russia is ready to send a delegation to Belarus for talks with Ukrainian officials helped somewhat. A U.S. government report, meanwhile, showed that that inflation last month was roughly in line with economists’ expectations, though it was still high. That, though, was all against the backdrop of Russia pressing its invasion of Ukraine to the outskirts of the capital Friday after unleashing airstrikes on cities and military bases and sending in troops and tanks from three sides in what amounts to the largest ground conflict in Europe since World War II.

The Dow Jones Industrial Average was up 355 points or 1.1%, at 33,583, as of 10:27 a.m. Eastern time. The Nasdaq composite swung between modest gains and losses. A day earlier, it briefly fell more than 20% below its record high, before roaring back suddenly.

Prices for everything from stocks to Bitcoin have been swinging sharply with the uncertainty about Russia and Ukraine, but the market’s brightest spotlight has perhaps been on oil and natural gas. Russia and Ukraine are lynchpins of the global supply chain for energy, particularly when it comes to European consumers, among other commodities.

Oil prices fell on both sides of the Atlantic, a day after they briefly topped $100 per barrel amid worries that the conflict and upcoming sanctions could disrupt supplies. Benchmark U.S. crude slipped 1.3% to $91.70 per barrel. Brent crude, the international standard, fell 0.8% to $94.67.

When announcing sanctions on Russia that he described as tough on Thursday, President Joe Biden said that he also wanted to limit the econoic pain for Americans. That led to some apparent relief that sanctions were not as severe as they could have been, and the drop in oil prices helped to lift stocks.

Stocks also rose across much of Europe and Asia Friday, recovering some of their sharp losses from immediately after Russia’s invasion. London’s FTSE 100 gained 3.4%, while France’s CAC 40 rose 2.9% and Germany’s DAX rose 2.8%.

Market players might be betting that the crisis could slow moves by central banks to cool inflation by raising interest rates and unwinding other support for pandemic-burdened economies, said Ipek Ozkardeskaya of Swissquote Bank SA.

“But in reality, it’s about volatility, high volatility that results from a high-voltage environment,” Ozkardeskaya wrote in a commentary. “It’s impossible to tell what direction the market will take in the next five minutes.”




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