Stock futures opened higher Tuesday evening after sliding for a second straight session during the regular trading day, with jitters over Russia's war in Ukraine and its implications for the global economy weighing on risk assets.
Contracts on the S&P 500 recovered some earlier losses. Earlier, the blue-chip index slid 1.6%, extending Monday's losses to kick off March trading on shaky footing. The Dow and Nasdaq each also fell sharply earlier, with risk assets reeling as investors contemplated the potential for more widespread supply chain and financial market disruptions as Russia deepened its attacks in Ukraine, and Western sanctions progressed.
Amid the ongoing geopolitical concerns, energy prices rose further, and West Texas intermediate crude oil prices rocketed above $100 per barrel. This came even after the International Energy Agency agreed to release 60 million barrels from global stockpiles to help ease pressure in the already-tight energy market.
"The problem is that that would not be enough to offset a potential supply shock coming from Russia, which is really what the market is grappling with right now," Ahmed Riesgo, Insigneo chief investment officer, told Yahoo Finance Live.
"The key question that all investors have to ask themselves right now is, are Russian exports going to stop? And if the answer to that is yes, then we need to de-risk further," he added about the broader markets. "And if the answer is no, then this could potentially be near a bottom."
The West's sweeping sanctions against Russia have so far formally included restrictions on Russia's central bank, access to the SWIFT global payments system, and freezes on a variety of key Russian institutions' and officials' assets, among some other measures.
Many major companies have also added further pressure to Russia, including Apple (AAPL), which said Tuesday it would pause all product sales to the country, and Disney (DIS), which said it will stop releasing films in Russia. Still, with many S&P 500 components seeing relatively little exposure to Russia and Ukraine from a revenue standpoint, many strategists suggested the direct fallout to U.S. corporate profits and broader economy will likely be relatively contained.
"Concerns are growing that the ramped-up sanctions on Russia and its leaders, now including restrictions on the important SWIFT banking system, as well as the Russian central bank and Putin himself, will have repercussions on global commerce that are hard to predict," Louis Navellier, chairman and founder of Navellier & Associates, wrote in a note. "This is on top of the disruption of all the products that Ukraine itself delivers to the world markets. It is generally believed that the majority of the damage will hit Europe, with China already seen stepping up to provide alternate markets for Russian exports, making the U.S. even more of a safe haven than it was already considered."
Still, the uncertainty generated by the war and the potential for higher global energy prices have left investors betting the Federal Reserve will eschew an ultra-hawkish tilt after its March monetary policy meeting. Fed Chair Jerome Powell is set to testify before Congress on Wednesday as part of his semi-annual appearance before lawmakers, offering what will likely be the Fed leader's first public remarks on how the geopolitical situation has informed the central bank's thinking on interest rate hikes and monetary policy tightening for the rest of the year.
Powell's testimony "will be complicated by the war in Ukraine, but it will not have required a complete rewrite," Ian Shepherdson, chief economist for Pantheon Macroeconomics, wrote in a note Tuesday. "Financial conditions have tightened as a result of the dip in stock prices and widening credit spreads, while the pass-through from higher oil prices will both crimp consumers' real incomes and raise production and distribution costs for businesses."
"We think it likely that the next forecasts, due three weeks from now, would have shown five or even six [interest rate] increases this year, before the invasion of Ukraine," Shepherdson added. "Now, we'd be very surprised to see six tightenings, and some of the wilder market forecasts now look adrift. We never expected a 50bp [basis point] move in March, and it looks even less likely now."
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6:12 p.m. ET Tuesday: Stock futures rise as investors eye Russia's war in Ukraine, await Powell
Here were the main moves in markets Tuesday evening:
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S&P 500 futures (ES=F): +4.25 points (+0.1%), to 4,308.00
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Dow futures (YM=F): +45 points (+0.14%), to 33,312.00
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Nasdaq futures (NQ=F): +10.5 points (+0.07%) to 14,016.00
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter
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