The Presidents Day holiday in the U.S. likely provided little mental relief for traders as the situation between Russia and Ukraine intensified, sending stock futures plunging Monday evening.
Futures on the Dow Jones Industrial Average tanked 431 points as of 7:45 p.m. ET, or 1.3%. The S&P 500 and Nasdaq Composite saw worse slides of 2.3% and 3.4%, respectively.
The U.S. holiday — along which came closed markets for trading Monday — brought several negative developments on the Ukraine-Russia front.
Russian President Vladimir Putin ordered the deployment of Russian troops to two breakaway regions of Ukraine. The move — seen by the West as a provocation — came after Putin recognized their independence.
Sky News reported that U.K. Prime Minister Boris Johnson will unveil a “significant” package of sanctions on Russia Tuesday morning. U.S. President Joe Biden will impose new sanctions on trade and financing in the two territories recognized by Putin, CNN reported.
Mixed sentiment from strategists on the market’s next move quickly materialized this evening.
“The reasons stocks are down on that news is that people fear that is the start of a full on invasion of Ukraine. And, if that happens, then we can expect a serious test of the January lows,” Sevens Report Research founder Tom Essaye told Yahoo Finance.
Truist co-chief investment officer Keith Lerner told Yahoo Finance, “From a market perspective, we would be careful not to overreact. Recall, we had a similar broad selloff on January 24 on a Monday that reversed intraday. Not to say that tomorrow will be work out the same way, but selling into panic isn’t typically a winning strategy.”
Amid the escalating tensions, Goldman Sachs’ Dominic Wilson said in a new note that markets are at risk of a severe pullback.
The S&P 500 is at a risk for a 6.2% drop in a full-on crisis scenario where Russian invades Ukraine and global superpowers respond with retaliatory measures such as sanctions, said Wilson.
Sell-offs would be more penalizing for the tech heavy Nasdaq and the small-cap Russell 2000 — Wilson sees 9.6% and 10.2%, worst-case scenario, respective declines.
Other veteran strategists on the Street remain equally concerned on the numerous headwinds now facing stocks in the near-term.
“I think what is most important about the Russia-Ukraine situation is not so much the volatility it’s causing on a very near-term basis, but the impact,” Charles Schwab chief investment strategist Liz Ann Sonders said on Yahoo Finance Live. “We know in the past that surging oil prices, especially in a waning growth environment, alone, have caused recessions. You add that into the mix the energy crisis happening around the globe already, and the fact we are now heading into a Fed tightening cycle, I think it would probably elevate fears about recession if, indeed, we see some sort of protracted military event.”