Whipsawed financial markets end higher as Russia invades Ukraine. Is it time to sell or buy stocks?
U.S. stocks opened lower Thursday as Russia began invading Ukraine. But remarks President Joe Biden made during an afternoon address on the conflict quelled some anxiety amongst investors.
The Dow Jones Industrial Average, S&P 500 and the NASDAQ Composite, which all opened down more than 2%, rebounded and closed higher.
The tech-heavy NASDAQ index ended Thursday with the greatest gains amongst the three indices. It closed 436 points higher, amounting to a 3.34% increase. The S&P 500 closed 63 points higher, or 1.5%, while the Dow closed 92 points higher, or 0.28%.
Crude oil was trading at more than $105 a barrel briefly on Thursday, the highest level since 2014, but closed under $100 a barrel.
Since Russian troops invaded Ukraine late Wednesday night, there have been at least 40 casualties and dozens of people were wounded from explosions that occurred in major cities, including the capital of Kyiv, and the cities of Kharkiv and Odesa.
Biden reiterated that "our forces are not and will not be engaged in a conflict with Russia in Ukraine." But he added that U.S. troops "will be sent to other parts of Europe to protect our NATO."
Biden also announced in the televised address that G7 leaders are limiting "Russia's ability to do business in dollars, euros, pounds and yen to be part of the global economy," in addition to other sanctions.
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Gold prices spike while bitcoin tumbles
Skittish investors are taking the more traditional path, opting to purchase gold over cryptocurrency. Gold futures closed 0.8% higher. During trading hours it hit its highest levels since September 2020.
Like gold, cryptocurrency is often viewed as an asset to hedge against inflation and stock market volatility. Bitcoin prices were down by more than 3% as of 1:15 p.m. EST on Thursday, but were up more than 3% around 4 p.m. Over the past five days, the cryptocurrency has shed more than 4% of its value.
Should you sell your stocks with Russia-Ukraine invasion?
While some stocks may look like a bargain during the sell-off, market analysts say investors should proceed with caution, warning that stocks could slide even further.
"As discomforting as the headlines are, from an investment perspective, we would urge investors not to overreact," said Keith Lerner, co-chief investment officer at Truist Advisory Services.
"Panic selling has generally not been a winning strategy," he added in a note.
Besides tensions with Russia, the Federal Reserve is weighing whether to raise interest rates more aggressively to curb inflation, which is at a 40-year high. That could lead to further declines in stocks as higher interest rates mean companies and consumers pay more to borrow, potentially crimping corporate profits.
Even so, analysts say it's crucial to think ahead.
"It’s important to recognize that the markets have tended to eventually rebound following geopolitical events, and snapbacks from corrections tend to be very sharp," Lerner said.
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What stocks should you buy amid Russia's invasion of Ukraine?
On the flip side, now is a good time to think about buying tech stocks, Daniel Ives and John Katsingris, analysts at Wedbush, said in a note.
"While each geopolitical shock event is different and unique, our playbook since 2000 has been to use these periods of global chaos to buy the tech winners that we view as way oversold in a panic-like sell-off."
Pay attention to cyber stocks, Ives and Katsingris said.
"With a significantly elevated level of cyberattacks now on the horizon, we believe added growth tailwinds for the cyber security sector and well-positioned vendors should be a focus sector for tech investors during this market turmoil," they added.
Will the Fed step back from raising rates?
At its most recent meeting, the Fed announced it plans to raise interest rates, which currently stand at near-zero levels, at least three times this year. The first hike is slated to go into effect next month.
But the economic risks the Russian conflict poses for the U.S. could cause the Fed to rethink its timeline for raising rates and the levels at which they do so.
"The implications of the unfolding situation in Ukraine for the medium-run economic outlook in the U.S. will also be a consideration in determining the appropriate pace at which to remove accommodation," Cleveland Fed President Loretta Mester said on Thursday.
As it stands, the conflict doesn’t merit the Fed taking a total 180-degree turn on raising rates, Bill Adams, chief economist for Comerica Bank, said in a note.
But the invasion makes it “much less likely” that the Fed raises rates by 50 basis points, Adams added, though it “is still very likely to raise rates by a quarter percentage point with U.S. inflation far above target, job growth momentum strong, and domestic demand buoyant.”
It’s also worth considering that inflation could slow even without Fed actions if the U.S. continues to produce more oil domestically.
That will “both constrain oil price rises and help economic growth here,” said Brad McMillan, chief investment officer at Commonwealth Financial Network.
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