Stock futures tumbled early Friday as worrisome developments in Ukraine weighed on investor sentiment as investors digested the latest labor market data.
Futures tied to the Dow Jones Industrial Average fell 203 points or 0.6%. S&P 500 futures were also down 0.5%, while Nasdaq 100 futures were down 0.5%.
The decline in futures followed reports that smoke could be seen from a nuclear power plant in Ukraine – Europe’s largest – following an attack by Russian troops.
Energy prices rose across the board, with US West Texas Intermediate crude up 2.4% to $110.26 and global standard Brent crude up 2.2% to $112.88. Government bond yields fell as investors reduced risk, with benchmark 10-year Treasuries slipping 6.2 basis points to 1.78%.
Futures cut their losses after a stronger-than-expected employment report in February. The economy added 678,000 jobs last month, up from the 440,000 expected by economists, according to Dow Jones data.
This is the last employment report before the next Federal Reserve meeting, where the central bank is expected to start raising interest rates. Fed Chairman Jerome Powell said this week he is leaning towards supporting a one-time 25 basis point hike in March. The basis point is 0.01%.
Meanwhile, economic sanctions by the United States and its allies have effectively cut off the Russian economy from much of the global financial system. JPMorgan said Thursday in a note that Russia’s economy could contract by 35% year on year in the second quarter.
On Thursday, the three major indexes closed lower after an unstable session. The Dow was positive for most of the day before closing 96 points lower. The Nasdaq, triggered by software stocks, fell 1.56%.
The Dow Jones index fell 0.9% over the week, and this is the fourth negative week in a row. The S&P 500 is down about 0.5% for the week and the Nasdaq Composite is down more than 1%.
Russian troops seized Europe’s largest nuclear power plant
Russian forces have taken control of Europe’s largest nuclear power plant outside of Zaporizhzhia in eastern Ukraine. The fire, which started in a building away from nuclear reactors, was contained. The reactors were not damaged.
Concerns about a possible radiation leak, fueled by popular memory of the Chernobyl disaster in northern Ukraine in the late Soviet period, turned out to be unfounded. The reactors are built in a completely different way and are equipped with a massive containment shell that protects them from most likely scenarios.
The Russian Defense Ministry blamed a group of Ukrainian provocateurs for the fire. The head of the International Atomic Energy Agency, Rafael Grossi, said that the damage was caused by Russian weapons. The Prime Minister of Lithuania said that the shelling of the plant by Russian troops is equated with “nuclear terrorism”.
Russia and China on Thursday voted against an IAEA resolution aimed at ensuring the safety of Ukraine’s nuclear installations.
Euro hits 22-month low amid growing fears over sanctions
The euro fell below $1.10 for the first time since May 2020 as the course of Russia’s war in Ukraine raised the possibility of tougher Western sanctions that would hit the eurozone economy disproportionately.
European stock markets also continued to fall, with Italy’s FTSE MIB set to fall 11% this week and Germany’s DAX 9.3%.
An aide to French President Emmanuel Macron told reporters on Thursday that people should “fear the worst” after Vladimir Putin, in a telephone conversation with Macron, reiterated his determination to fight the war to the end.
The number of senior European politicians who are now willing to accept a total ban on Russian energy export purchases, which were originally exempt from last week’s sanctions packages, is growing by the day as scenes of destruction in Ukrainian cities multiply.
Commodities set for best week since the 1960s
Commodities continued to post their biggest weekly gains since the 1960s as the prospect of tougher sanctions on Russian exports continued to force buyers to look for substitutes.
By 6:25 am ET, U.S. oil futures were up 2.2% to $110.06 a barrel, while Brent was up 2.0% to $112.66 a barrel. Although this is slightly below the peaks seen earlier this week, it is still a weekly increase of over 20%, the kind of growth that has always led to the destruction of demand and economic slowdown in the past.
Wheat prices also continued to rise the day after an Estonian cargo ship sank in the Black Sea after hitting a mine. This practically deprived any ship of the opportunity to insure when entering and leaving the Russian and Ukrainian ports of the Black Sea. These two countries account for nearly 30% of world wheat exports.
Elsewhere, nickel futures in London hit $29,823 a tonne, the highest level since 2008, on the same concerns over the availability of supplies from Russia.
Stocks to watch
Tesla (TSLA) – Shares fell 1.2% in premarket trading after CEO Elon Musk challenged the United Auto Workers union to try to set up his company’s assembly plant in Fremont, Calif.
Sweetgreen (SG) – Shares of Sweetgreen rose 19.9% in premarket trading after the lettuce chain reported strong sales growth in its first quarterly report since going public in November. The company also reported rising losses.
Gap (GPS) – Shares rose 7% in premarket trading after the retailer reported narrower-than-expected fourth-quarter losses and issued strong earnings guidance. Gap reported a loss of 2 cents per share against 14 cents forecast by analysts at Refinitiv. Revenue also beat estimates.
Costco Wholesale (COST) – Retail shares fell 2% after a better-than-expected quarterly report. Costco reported fiscal second-quarter earnings of $2.92 per share on revenue of $51.9 billion. Analysts polled by Refinitiv had expected earnings of $2.74 on revenue of $51.47 billion.
Marvell Technology (MRVL) – Shares fell 2.3% despite marginal gains in earnings. Marvell reported fourth-quarter earnings of 50 cents per share, excluding items, on revenue of $1.34 billion. Analysts had expected earnings of 48 cents per share on revenue of $1.32 billion, Refinitv reported.
Broadcom (AVGO) – Chip shares rose more than 3% in premarket trading after Broadcom beat Wall Street expectations in the first fiscal quarter. The company reported adjusted earnings of $8.39 per share, while analysts polled by Refinitiv had expected $8.08 per share. The firm’s second-quarter revenue forecast was also better than expected.
Best Buy (BBY) – Retail stocks fell 2% in early morning trading after Raymond James downgraded Best Buy to market performance from the best. “We are putting our recommendation on the stock to sleep at the moment,” said Raymond James.