U.S. stocks traded mixed on Monday, with the Nasdaq Composite bouncing back from earlier losses, following a strong two-week run as short-term bond yields continued to rise and investors digested developments in the Russia-Ukraine war.
What’s happening
- The Dow Jones Industrial Average DJIA, -0.43% fell 163 points, or 0.5%, to 34,699.
- The S&P 500 SPX, -0.02% lost 3 points, or less than 0.1%, to trade at 4,540.
- The Nasdaq Composite COMP, +0.42% was up 57 points, or 0.4%, at 14,227.
The Dow, S&P 500 and Nasdaq Composite all registered gains last week, and each notched their best two-week percentage gains since March 2021, November 2020, and April 2020, respectively.
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What’s driving markets
The market remains focused on developments surrounding Russia’s invasion of Ukraine. President Volodymyr Zelensky said Ukraine could declare neutrality and offer security guarantees to Russia as he sought a direct meeting with Russian President Vladimir Putin. Talks between the two sides are due to resume in full in Turkey on Tuesday.
Read: Zelensky pushes peace ‘without delay,’ and wants to talk to Putin face-to-face
Late last week, Moscow signaled it was shifting its war aims to focus on the eastern half of the country, though Russian forces continued to rain missiles on Ukrainian cities, news reports said. Western officials saw few signs that Russia was willing to seek a peaceful resolution, The Wall Street Journal reported.
Traders were also looking at news from the world’s No. 2 economy, China, which locked down its financial capital, Shanghai, in response to rising COVID-19 cases. That left oil prices CL00, -6.74% more than 6% lower on related demand worries.
Bond trading remained volatile, with the yield on the 10-year Treasury TMUBMUSD10Y, 2.464% temporarily moving further above 2.50% before pulling back as buyers returned to government debt. The global bond market is heading for its worst returns since the Marshall Plan was implemented after World War II.
Meanwhile, the yield curve continues to flatten, a potential signal that investors fear an economic slowdown. The 5-year Treasury yield briefly traded above the rate on the 30-year Treasury bond, temporarily inverting that measure of the curve. The 2-year yield remains below the 10-year yield, but a rise above the longer-term rate would be seen as signaling a possible recession.
“Our base case is that the US economy can avoid a recession, lowering the threat of a sustained downtrend in stocks,” Mark Haefele, chief investment officer at UBS Global Wealth Management, wrote in a note. “Investors should brace for higher rates — including potentially adding exposure to value and financial stocks which tend to outperform as central bank policy tightens — without overreacting by exiting equity markets.”
“We favor selected equity overweight and underweight positions, resulting in a neutral overall stance on the asset class,” he said.
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The S&P 500 needs to close above 4,587.77 to exit a market correction, according to Dow Jones Market Data. The large-cap benchmark entered a correction on Feb. 22, when it closed more than 10% below its record finish from Jan. 3. A correction is defined as a fall of more than 10%, but less than 20%, from a recent peak. An exit would occur when the index rises 10% from its correction low.
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Companies in focus
- Tesla Inc. shares TSLA rose 7.6% after the electric vehicle giant disclosed plans to enable a stock split, which would be the second in two years.
- Shares of Apple Inc. AAPL, -0.05% edged down 0.1% after a Nikkei Asia report said the company plans to make about 20% fewer iPhone SEs next quarter.
- Netflix Inc. NFLX, -0.23% shares were slightly lower after executives predicted that growth would suffer much more than expected at the beginning of 2022.
Other assets
- The ICE U.S. Dollar Index DXY, +0.38%, a measure of the currency against a basket of six major rivals, rose 0.3%.
- Gold futures settled lower for a second straight session, with the contract for April delivery GCJ22, -1.08% falling $14.40, or 0.7%, to settle at $1,939.80 per ounce.
- Bitcoin BTCUSD, +3.48% jumped 3.5% to trade around $47,685.
- The Stoxx Europe 600 SXXP, +0.14% ended 0.1% higher, while London’s FTSE 100 UKX, -0.14% fell 0.1%.
- The Shanghai Composite SHCOMP, +0.07% ended 0.1% higher and the Hang Seng Index HSI, +1.31% jumped 1.3% in Hong Kong, while Japan’s Nikkei 225 NIK, -0.73% fell 0.7%.
— Steve Goldstein contributed to this article.
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