Ukraine rattles US stock markets, Fear Index pops

February 14, 2022

James Dunn

James Dunn has been a finance and business journalist since 1988, operating across the entire spectrum of these areas, from personal investment to high-end institutional finance. Within that spectrum James has developed a wide range of knowledge of the financial markets, investment asset classes, the global economic environment and most importantly, how these all coalesce.

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US stock markets fell sharply on Friday after the Biden Administration warned American citizens in Ukraine to leave “immediately” due to fears of an imminent invasion by Russia (other NATO nations followed suit).

Investors have enough worries already with inflation, interest rates and valuations, and the Russia/Ukraine concerns – particularly with respect to energy prices – could prove too much for market index levels to be maintained.

The S&P 500 index headed into the weekend down 85.4 points, or 1.9%, while the 30-stock Dow Jones Industrial Average lost 1.4%, and the tech-heavy Nasdaq was hardest-hit, down 2.8%.

Oil and defense stocks rally

West Texas Intermediate (WTI) crude oil jumped 3.6%, to US$93.10 a barrel, while Brent crude oil added 3.3%, to US$94.44 a barrel. Last week, analysts at investment bank JP Morgan warned the market that crude prices could go as high as US$150 a barrel if there are disruptions caused by the conflict.

That was good news for the oil stocks such as Occidental Petroleum (up 5.7%) and Phillips 66 (up 4.2%); investors also never waste a crisis in terms of the defence heavyweights, with Northrop Grumman (NYSE: NOC) adding 4.5%, Lockheed Martin (NYSE: LMT) up 2.8%.

Fear Index pops

The market’s increasing worry levels showed up in the VIX Index, which tracks the volatility expectations of the stock market on the basis of S&P 500 options; the so-called “Fear Index” surged 14.4% on Friday.

Back home on the ASX, the S&P/ASX 200 (ASX: XJO) is set to follow US stock markets lower at the open this morning. For a round-up of the latest news, check out my ASX 200 morning report.

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