News of Russia’s full-scale invasion of Ukraine sent stocks plummeting out of the gate today.
“We’re clearly in risk-off mode in the market right now given the uncertainty regarding the military operations in Ukraine,” says Brian Price, head of investment management for Commonwealth Financial Network.
“There seems to be some element of surprise that the events have escalated so quickly and I would expect that we’ll continue to see volatility in the near term.”
Indeed, after the Dow Jones Industrial Average flirted with correction territory and the Nasdaq Composite slipped below its bear-market level on an intraday basis, the major market indexes reversed course as President Joe Biden announced a new round of sanctions against Russia, including freezing trillions of dollars in Russian assets, and said he is sending additional U.S. troops to Eastern European countries that are in NATO.
By the close, the Nasdaq – which was down 3.4% at its session low – was up 3.3% at 13,473. The S&P 500 Index also finished in positive territory, gaining 1.5% to end at 4,288. The Dow, meanwhile, ended with a 0.3% gain at 33,223, after trading as low as 32,272 earlier.
Other news in the stock market today:
- The small-cap Russell 2000 joined in on the roller-coaster ride, ending the day up 2.6% at 1,995, after being down as much as 2.6% in intraday trading.
- Gold futures gained 0.8% to settle at $1,926.30 an ounce, their highest finish in 17 months.
- Bitcoin rose 2% to $38,466.10. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
- Moderna (MRNA) was a big winner today, jumping 15.1% after earnings. In its fourth quarter, the drugmaker reported adjusted earnings of $11.29 per share on $7.2 billion in revenue, exceeding the $9.90 per share and $6.8 billion expected by analysts. The company also said it sold $17.7 billion of its COVID-19 vaccine and expects to sell at least $19 billion in fiscal 2022.
- Booking Holdings (BKNG), on the other hand, slumped 7.1% after its quarterly results. The online travel reservation company reported adjusted earnings of $15.83 per share and revenue of $3.0 billion in its fourth quarter, beating out analysts’ expectations for earnings of $13.30 per share on $$2.9 billion in sales. The company also said gross travel bookings for the three-month period were up 160% year-over-year to $19.0 billion. Still, Booking CEO David Goulden warned of “a potentially volatile environment with high COVID infection rates in some part of the world and geopolitical uncertainty that could impact our business, especially in Europe,” in the company’s earnings call. UBS Research analyst Lloyd Walmsley maintained a Buy rating on BKNG. “Looking ahead, we see scope for a stronger-than-expected recovery in 2022 and into 2023 in terms of room nights and bookings which we think would flow through at attractive incremental margins,” he writes in a note.
One Way to Hedge Geopolitical Risk
One way to hedge international turmoil: commodities. This is according to a team of Goldman Sachs Commodities Research strategists.
“With news of Russia’s invasion of Ukraine emerging, commodity markets have rallied aggressively, acting as the clear geopolitical hedge of first resort,” they write.
This was seen in the price action for several commodities today, most notably U.S. crude oil futures, which topped the $100 per-barrel mark in intraday trading – their first move above this level since 2014 – before settling up 0.8% at $92.81 per barrel.
And prices are likely going to head even higher, with many experts predicting oil could hit the $125 per-barrel mark. “Uncertainty around potential sanctions is beginning to create a potential supply shock,” the team says. “In our view, until the uncertainty around the rapidly escalating situation is resolved, commodity price risk remains skewed to the upside.”
Not only would a continued rise in oil prices spell good news for traditional energy stocks and energy exchange-traded funds, but also master limited partnerships (MLPs). These firms, which are largely responsible for pipeline infrastructure and storage facilities, offer both exposure to the booming energy market and high dividend yields to boot.