S&P 500 on course for second successive weekly loss, tumbles under 4350 as Eastern Ukraine violence escalates

US equity markets tumbled for a second successive session on Friday ahead of the long weekend and now look on course to post a second successive negative weekly close for the first time since November 2021. US equity investors said on Friday that they didn’t want to be caught “exposed” ahead of the long weekend (US markets are shut on Monday for President’s Day) and were taking profit just in case the Ukraine crisis further escalates. The S&P 500 was last down just under 1.0% on Friday and trading below the 4350 level, putting it on course to post a 1.8% weekly loss, taking its losses since earlier monthly highs near 4600 to more than 5.0%.

S&P 500 bears will be hoping that, given the index pushed to fresh weekly lows on Friday, the next stop at some point next week will be a test of the annual lows in the 4220s, a further more than 2.5% down from current levels. As hostilities between pro-Russia separatists and the Ukrainian military in Eastern Ukraine escalate and Russia continues to amass troops near the Ukrainian border, jitters about the breakout of a broader Russo-Ukrainian war will keep equity investors skittish. One key event on the radar next week is a face-to-face meeting between US Secretary of State Anthony Blinken and Russian Foreign Minister Sergey Lavrov next week which might de-escalate tensions somewhat. Reportedly the US agreed to the meeting on the conditions that Russia doesn’t invade Ukraine.

With geopolitics remaining at the forefront of investor attention given fears that an outbreak of war might lead to massive Western sanctions versus Russia with inflationary implications for the global economy, Fed speak and US data has been ignored this week. In truth, there hasn’t been any tier one data to impact Fed tightening expectations too much, nor have Fed members said anything new or particularly interesting. This is likely to remain the case next week, with the only data of note flash February PMIs, January Core PCE inflation and the second estimate of Q4 GDP growth.

Returning back to US equities, the Nasdaq 100 index dropped 1.0% on Friday to test the 14K level, taking its losses on the week to around 1.6%. At current levels, the index is trading more than 16% below last November’s record highs in the 16.75K region. The bears will now be looking for the index to fall back towards the 13.5K area, which would mark a 20% drop from recent highs and thus confirm a “bear market”.

The Dow, meanwhile, dropped 0.6% towards a test of the 34K level, also putting the index on course to post a second successive week of losses. The index has now reversed nearly 5.0% lower versus last week’s highs in the 35.8K area. The S&P 500 CBOE Volatility Index or VIX, often referred to as Wall Street’s “fear gauge”, was slightly higher in the 28.00s, a more than four point rebound from earlier weekly lows around 24.00.