The S&P 500 index opened about 2.0% down on Thursday as Russia tipped the diplomatic standoff and invaded Ukraine. Interestingly, however, the risk-off in U.S. equities was short-lived as the market closed back in the green.
Russia still a part of SWIFT
According to Stifel’s Ron Kruszewski, the sharp rebound in the U.S. indices before the closing bell was largely attributed to President Biden’s address to the nation. On CNBC’s “Power Lunch”, he said:
It’s what the president didn’t do that caused the markets to rally. What he didn’t do was say that they were going to expel Russia from SWIFT. That is a big deal. Excluding Russia from SWIFT would’ve escalated the economic war. It’s not off the table yet, but it didn’t happen today.
The Nasdaq Composite ended Thursday more than 3.0% up while Dow Jones Industrial Averages also recovered all of its intraday losses before the end of the trading day.
Ukraine crisis will add to inflation
The chief executive of the independent investment bank, however, agrees that Russia’s military operation will aggravate inflation, making things even harder for the global central banks.
The conflict will add to inflation. It’s adding to energy, it can add to food prices, it can add to rare metal prices like aluminum. There’s no question that today’s events increase inflationary pressures and may slowdown economy. This’ll make price stability a greater challenge for the Fed.
Also on Thursday, economist Mohamed El-Erian said a 50 basis points increase in March and calls of up to nine rate hikes in 2022 are completely off the table now that the geopolitical tensions have escalated.
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