US stock index futures declined on Monday amid the sanctions imposed by the US and the EU. However, there was no major sell-off as Russian and Ukrainian officials gathered for a meeting to discuss a potential cessation of hostilities between the two sides. Dow futures fell 400 points or almost 1.2%. S&P 500 futures sank 1.37%, and Nasdaq 100 futures sank 1.28%.
Let me remind you that the American stock market showed very strong growth at the end of last week, even against the background of unrest around the conflict between Russia and Ukraine. The imposition of sanctions and sharp problems with the ruble exchange rate forced the Central Bank of Russia to more than double its key interest rate from 9.5% to 20%. At the weekend, the Russian ruble showed a 16% drop, and at the time of writing, the dollar is worth 95 Russian rubles on the market, against 74 rubles in mid-February.
As for the raw materials market, futures for US West Texas Intermediate crude oil on Monday rose by more than 5% to $ 96.30 per barrel, and April futures for Brent crude jumped immediately by 5% to $ 102.75 per barrel. As for natural gas, futures are trading at $ 2.84. Government bond yields have fallen sharply across the curve, with the 10-year Treasury bond last showing a yield of 1.92%.
Some experts note that this may be the sharpest depreciation of the ruble in modern history. However, it will be possible to talk about the movement towards stabilization of this issue only after appropriate steps on the part of the politicians of the two countries.
As for the sanctions, over the weekend, the United States joined its allies in Europe and Canada and banned key Russian banks from accessing the SWIFT interbank exchange system. The system unites more than 11,000 banks and financial institutions in more than 200 countries and territories.
Despite this, Russia's offensive against Ukraine continued over the weekend. Russian military equipment is now located in the second largest city of Ukraine, Kharkiv. Many fear that Kyiv will be the next target. A lot depends on today's negotiations between Russia and Ukraine.
Tensions are also rising all over the world and the reason for this is the actions of Russian President Vladimir Putin, who on Sunday put his country's nuclear deterrent forces on high alert. This was supposedly a response to the growing likelihood of an invasion by NATO troops.
In any case, traders will now be watching very closely for any signs of a resolution of the crisis. Of course, volatility will be ensured in any case: whether it is good results and peace talks or news of a possible escalation of tensions, increasing the likelihood of a world war involving NATO members.
Moving away from politics, Federal Reserve Chairman Jerome Powell is expected to address the US Congress this week. A lot also depends on his statements: traders are wondering whether geopolitical events will affect the Fed's rate hike or not. Investors will also receive a report from the US Department of Labor on the unemployment rate by the end of this week.
As for the technical picture of the S&P 500
The pressure on the index remains, but the demand is still quite high. Today, the bulls will try to return and gain a foothold above $ 4,341. If this fails, the pressure on the trading instrument will increase, which will lead to a decrease in the area of $ 4,292. A breakdown of this range will increase the pressure on the index and return the bear market with the prospect of updating the lows already: $ 4,233 and $ 4,175. A quick return above $ 4,341 and fixing the range on this will leave hope for a market recovery, however, what will happen in the regular session today is a big question. With the growth, we can expect new active sales already in the region of $ 4,383 and $ 4,433. A lot will depend on the further development of the conflict on the territory of Ukraine and a possible dialogue between the presidents of the two countries.