U.S. stock futures were muted in extended trading Monday after another volatile day on Wall Street as investors weighed intensifying Russian attacks on Ukraine and an onslaught of new sanctions by the West against the likelihood geopolitical uncertainty could knock the Federal Reserve off course for an aggressive first bump in interest rates.
Contracts on Wall Street's main benchmarks were flat heading into the overnight session after February's final trading day marked the Dow and S&P 500's worst start to year since 2020. The Nasdaq, now down 12.1% year-to-date, recorded its worst January and February since 2009.
Russia’s economy was in the limelight on Monday after a ramp up on penalties by the U.S. and European allies for its invasion of Ukraine rocked the country’s financial system and sent the ruble tumbling 30%.
Measures by the U.S. and Europe, including a move to block some Russian banks from the SWIFT payment network and sanctions on the Central Bank of Russia, have already dealt a harder-than-expected blow to the country’s economy, testing a decades-long effort by President Vladimir Putin to make the system sanction-proof.
The U.S., European Commission, France, Germany, Italy, U.K. and Canada set forth a joint statement Saturday booting select Russian banks from the SWIFT messaging system, a network that works to facilitate trillions of dollars in global transactions.
On Monday, the U.S. also barred Americans from conducting business with the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federations and the Ministry of Finance of the Russian Federation. Western financial institutions are expected to follow suit, with HSBC curbing its dealings with a docket of Russian banks including the second-largest, VTB.
The Russia-Ukraine crisis "is going to create enormous pain and hurt to the Russian economy," Virginia Sen. Mark Warner told Yahoo Finance Live on Monday. "This is a much bigger economic hit than Putin anticipated."
As investors watch the crisis intensify overseas, in the U.S., they revert their attention back to the Federal Reserve and its plan to lift interest rates as soon as this month.
Sky-high inflation prints month-over-month have elevated concerns among market participants that central bank officials will raise short-term borrowing costs more aggressively than expected to mitigate increasing prices, even stoking the possibility of a double interest rate hike of 50 basis points mid-March. But with ambiguity over how the Russia-Ukraine turmoil will pan out, Fed watchers anticipate the central bank may tread lightly on its rate hike.
“Given the current conflict in the Ukraine, there remains considerable near term uncertainty with central bank intentions,” LPL Financial strategists Lawrence Gillum and Ryan Detrick said in a note, adding that upward pressure on the prices of oil and other commodities and sanctions against Russia could result in broader economic repercussions. “As such, inflationary pressures may remain high particularly as it relates to gas prices.”
Still, like many Fed-watchers, LPL has priced in a first hike of 25 basis points this month – for now.
“Until there’s either some sort of negotiated deal or the violence calms down in Ukraine, markets will remain at heightened risk and Powell will be looking to be a little more careful,” Spouting Rock Asset Management chief strategist Rhys Williams told Yahoo Finance Live.
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6:05 p.m. ET: Stock futures hold steady as investors monitor Russia-Ukraine crisis
Here were the main moves in markets ahead of overnight trading Monday:
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S&P 500 futures (ES=F): +3.75 points (+0.09%), to 4,371.75
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Dow futures (YM=F): +20.00 points (+0.06%), to 33,860.00
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Nasdaq futures (NQ=F): -9.50 points (-0.07%) to 14,218.50
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Crude (CL=F): +$0.16 (+0.17%) to $95.88 a barrel
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Gold (GC=F): +$8.80 (+0.46%) to $1,909.50 per ounce
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10-year Treasury (^TNX): -14.7 bps to yield 1.822%
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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