Stocks mixed as EU eyes more sanctions against Russia

U.S. stocks were mixed on Monday as investors monitored the potential for more sanctions against Russia amid ongoing concerns over inflation and global economic growth.

The S&P 500 traded flat, while the Dow dipped. The Nasdaq Composite rose about 0.4% just after market open as technology shares outperformed. Shares of Twitter (TWTR) soared by more than 20% after Tesla (TSLA) CEO Elon Musk disclosed he now owns an about 9.2% stake of the social media company.

Investors globally considered the European Union’s next punitive measures against Russia as the more than month-long war in Ukraine escalated further. The EU responded Monday to apparent war crimes in Ukraine, as Russian forces allegedly now widely killed civilians and attacked civilian infrastructure in major cities, with the bloc saying in a statement it would, “as a matter of urgency, work on further sanctions against Russia.” Some major European officials including Germany’s defense minister said they would support banning Russian natural gas — a move previously excluded from sanctions as Russia supplies about 40% of Europe’s gas energy.

U.S. crude oil prices edged higher Monday morning and looked to rise for the first time in three sessions. Brent crude oil, the international standard, also gained.

JPMorgan (JPM) CEO Jamie Dimon also called attention to the war in Ukraine as one of three key risks he saw to the economic outlook, according to his widely read annual shareholder letter released Monday. The other included “the dramatic stimulus-fueled recovery from the COVID-19 pandemic” as well as “the likely need for rapidly raising rates and the required reversal of QE [quantitative easing]” from the Federal Reserve, Dimon said.

“We do not know what its outcome ultimately will be, but the hostilities in Ukraine and the sanctions on Russia are already having a substantial economic impact. They have roiled global oil, commodity and agricultural markets,” Dimon said. “Our economists currently think that the euro area, highly dependent on Russia for oil and gas, will see GDP growth of roughly 2% in 2022, instead of the elevated 4.5% pace we had expected just six weeks ago. By contrast, they expect the U.S. economy to advance roughly 2.5% versus a previously estimated 3%.”

Concerns over the resilience of the U.S. economy in the face of a geopolitical crisis and still-elevated inflation have been fanned further as a closely watched portion of the Treasury yield curve inverted — a move that previously has preceded recessions. As of Monday morning, the yield on the benchmark 10-year note remained below that on the shorter-term 2-year note. Such a phenomenon has occurred before each of the last eight recessions since 1969.

“Investors have been particularly concerned about the prospect of yield curve inversion as a signal for imminent recession,” Goldman Sachs strategist David Kostin wrote in a note. “Our rates strategists recently raised their forecasts and now expect the 2-year UST and 10-year UST yields to end 2022 at 2.9% and 2.7%, respectively, for a 20 bp [basis point] inversion.”

“However, our strategists note that the nominal curve tends to invert more easily in high inflation environments, which means that it would take a deeper nominal curve inversion than in recent cycles to produce a comparable recession signal,” he added. “Asset indicators imply a 38% probability of recession within 24 months.”

9:42 a.m. ET: Hertz announces plans to buy EVs from Tesla rival Polestar

Hertz (HTZ) said Monday it planned to purchase as many as 65,000 electric vehicles from Polestar, an automotive start-up competing with incumbents like Tesla in the market for electric vehicles.

The car rental company said it would make these purchases over five years, with availability set to begin this spring in Europe and later this year in North America and Australia.

“For Hertz, the partnership is part of the company’s ongoing commitment to lead in electrification, shared mobility and a digital-first customer experience,” according to the company’s press statement. “In addition to making the fleet available to its business and leisure customers, Hertz is extending EVs to rideshare drivers as a way to further accelerate electrification.”

In October 2021, Hertz previously announced it ordered 100,000 Tesla Model 3 vehicles for delivery in late 2022.

9:31 a.m. ET: S&P 500, Nasdaq open slightly higher

Here’s where markets were trading just after the opening bell:

  • S&P 500 (^GSPC): -2.68 (-0.06%) to 4,543.18

  • Dow (^DJI): -80.73 (-0.23%) to 34,737.54

  • Nasdaq (^IXIC): +42.83 (+0.3%) to 14,304.75

  • Crude (CL=F): +$3.35 (+3.37%) to $102.62 a barrel

  • Gold (GC=F): +$10.80 (+0.56%) to $1,934.50 per ounce

  • 10-year Treasury (^TNX): +3.3 bps to yield 2.393%

9:04 a.m. ET: Stocks’ Q1 drop was shallower than previous quarterly declines: BofA

With the second quarter of 2022 now under way, Bank of America took a deeper look into the first quarter’s biggest quarterly decline since the first three months of 2020. The firm found despite the volatility, stocks still fared better than in many cases in the past.

“Despite elevated levels of uncertainty, stocks bounced back in March (S&P 500 +3.7% total return) and closed 1Q just down 4.6% (was down as much as 12.3%),” Savita Subramanian, Bank of America equity and quant strategist, wrote in a note Monday. “But a 4.6% decline in a quarter is smaller than the historical average decline of 6.5% for down-quarters since 1936. Stocks also outperformed both long-term Treasuries (-10.2%) and corporate bonds (-7.7%) amid higher rates (10-yr yield +83bps).”

Subramanian also noted that the sector performance during the first quarter — with the energy sector posting its best quarter since 1970 — favored names that have historically outperformed during periods of stagflation, or times with high inflation and low growth.

“The top three sectors YTD (Energy +38%, Utilities +4%, and Staples -2%) were the best performers during stagflation periods in the past, marked by below-average GDP and rising inflation … while the bottom three sectors (Comm. Svcs. -12%, Cons. Disc. -9% and Tech -9%) have been the worst performers during stagflation,” she added.

7:48 a.m. ET Monday: Stock futures edge higher

Here’s where markets were trading Monday morning:

  • S&P 500 futures (ES=F): +5.25 points (+0.12%) to 4,544.5

  • Dow futures (YM=F): -3 points (-0.01%) to 34,715.00

  • Nasdaq futures (NQ=F): +49.25 points (+0.32%) to 14,911.00

  • Crude (CL=F): +$0.75 (+0.76%) to $100.02 a barrel

  • Gold (GC=F): +$10.10 (+0.53%) to $1,933.80 per ounce

  • 10-year Treasury (^TNX): +2 bps to yield 2.395%

NEW YORK, NEW YORK – APRIL 01: Traders work on the floor of the New York Stock Exchange during afternoon trading on April 01, 2022 in New York City. U.S. stocks closed higher on the first day of trading of the second quarter of 2022 after the Department of Labor released a jobs report that showed an increase well above pre-pandemic trends. (Photo by Michael M. Santiago/Getty Images)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.

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