Stocks Fall Amid Ukraine Concerns, Inflation Data

U.S. stocks and bond yields sank Friday, as growing tensions between Russia and Ukraine sent investors flocking to safer assets.

All three major U.S. stock indexes finished the day lower, capping another volatile week on Wall Street. Just days ago, it seemed possible that indexes would extend their weekly winning streak to three. But concurrent concerns about rising inflation and geopolitical turbulence sent stocks tumbling in the final two days of the week.

On Friday afternoon, the White House said it believes Russia could invade Ukraine at any time and urged Americans to leave the country as soon as possible. Investors, in turn, fled from stocks and sought safety in government bonds. The retreat from stocks extended a selloff that began Thursday after data showed inflation hit 7.5% in January, raising fresh concerns that the Federal Reserve might have to tighten monetary policy more aggressively than once thought.

The combination of economic news and global tensions injected fresh anxiety into a stock market that is already on shaky footing. Before this week, stocks were already down for 2022 after a turbulent January.

The S&P 500 tumbled 85.44 points or 1.9% in Friday trading, to settle at 4418.64. Its combined two-day loss over Thursday and Friday amounted to 3.7%, the index’s largest two-day percentage decline since October 2020.

The technology-heavy Nasdaq Composite slid 394.49 points, or 2.8%, on Friday to finish at 13791.15. The Dow Jones Industrial Average lost 503.53 points, or 1.4%, to end at 34738.06.

All three major indexes ended the week with losses. The S&P 500 and Nasdaq Composite lost 1.8% and 2.2%, respectively, for the week. The Dow ended with a weekly loss of 1%.

“There were a lot of looming things that are suddenly on everyone’s radar and they are all contributing to the intensified volatility,” said John Lynch, chief investment officer at Comerica Wealth Management. “The market has been counting on diplomacy and to a large extent ignoring the threat” on the Ukranian border.

The volatility in the stock market rippled across asset classes this week. Oil prices surged Friday, with Brent crude, the international oil benchmark, jumping 3.3% to $94.44 a barrel, its highest settle since September 2014.

In the bond market, meanwhile, the yield on the benchmark 10-year Treasury note retreated, a day after topping 2% for the first time since mid-2019. The yield, which settled Thursday at 2.028%, fell to 1.951% Friday. Yields and bond prices move inversely.

The sharp moves across the market unwound some of the stability that had been restored to markets earlier in the week. Before Thursday’s volatile selloff, the S&P 500 had risen in seven out of the last nine sessions.

Some think rising inflation means companies are forced to raise their prices. But as WSJ’s Dion Rabouin explains, it actually works the other way around: Corporations actually drive inflation, and data show that they have been and will continue to push prices up for some time. Illustration: Elizabeth Smelov

Before markets opened Friday, many investors were primarily focused on whether the Fed might accelerate interest-rate increases this spring to ease surging prices and cool the economy. Many investors were trying to carve out predictions on how large and how frequent the rate hikes might be.

“Inflation is currently in the public eye. It has become a political question,” said Florian Ielpo, head of macro at Lombard Odier Investment Managers. “This is something that is concerning us, we have a rising risk of monetary policy mistakes. This is the number one risk we see in 2022.”

By Friday afternoon, however, focus had turned to the Ukranian border. The Cboe Volatility Index—Wall Street’s so-called fear gauge, also known as the VIX—jumped, settling at 27.36, its highest closing level since late January.

Among S&P 500 sectors, only the energy and utilities groups finished the day higher Friday. Occidental Petroleum gained $2.30, or about 5.7%, to finish at $42.98. Hess added $3.80, or 4.1%, to close at $96.20.

Zillow’s Class C shares gained $6.61, or 14%, to finish at $55.40 after it reported a jump in revenue for its core unit, despite losing $881 million on its closed home-flipping business last year. Fintech company Affirm lost $12.13, or 21%, to close at $46.55 after its sales forecast came in below Wall Street’s expectations. It also plunged 21% Thursday.

Apollo Global Management fell by $4, or 5.7%, to end at $65.67 after it reported a lower profit. The Wall Street Journal reported that the private-equity firm was nearing a deal to buy Worldline’s point-of-sale terminal business.

In international markets, the pan-continental Stoxx Europe 600 slipped 0.6% for the day.

In Asia, the Shanghai Composite Index fell 0.7%, while Hong Kong’s Hang Seng Index ticked down 0.1%. Markets in Japan were closed for a public holiday.

Traders worked on the floor of the New York Stock Exchange on Thursday.

Photo: David L. Nemec/Associated Press

Write to Caitlin McCabe at [email protected] and Anna Hirtenstein at [email protected]

Corrections & Amplifications
The yield on the benchmark 10-year Treasury note climbed to 2.036%, before easing to 1.996%. An earlier version of this article incorrectly said the yield rose to the highest intraday level since August 2019. (Corrected on Feb. 11.)