If this were to happen in a Russia-Ukraine crisis, the STOCK market would take a beating

2022-09-23 0 By

The crisis is a risk for stocks, but it hasn’t really unnerved investors yet.On Tuesday, the Dow Jones Industrial Average, the S&P 500 and the Nasdaq composite ended down 1.4%, 1% and 1.2%, respectively, though the indexes finished well below their intraday lows.While U.S. stocks have fallen on the crisis, panic has yet to erupt.At the moment, the market is most worried about the U.S. and other countries imposing tough sanctions on Russian oil exports, because that would further reduce global supplies of oil, pushing up prices and further weakening the purchasing power of consumers already struggling with high inflation.Such sanctions have not yet occurred.In a speech Tuesday afternoon, U.S. President Joe Biden stopped short of imposing any sanctions on Russian oil exports.Mr. Biden unveiled sanctions against two of Russia’s largest financial institutions, a ban on Russian sovereign debt issuance in the West and said sanctions against several Russian officials would take effect on Wednesday.Biden also signed an executive order banning U.S. personnel from investing in the Donetsk and Luhansk Peoples Republics, imports of goods and services from the region, and exports of goods and services from the United States.If the US and Europe impose tough sanctions on Russian oil, stocks will fall again from here.Tom Essaye, founder of Sevens Report Research, said: “On Ukraine, the next thing investors will be looking at is whether the West announces new sanctions against Russia and how severe they will be, which will add to the selling pressure on stocks.”One reason the Biden administration has not yet imposed more tough sanctions is that Russia has not been particularly aggressive.Kim Wallace, a policy expert and senior managing director at 22VResearch, said that so far the “invasion” of Ukraine has not been in full swing, which is one reason Mr. Biden’s response has been less forceful.Mr Biden confirmed that view on Tuesday when he said the US would step up its response if Russian military aggression escalated.One reason oil prices haven’t risen particularly sharply in the past few days, even though they are up nearly 24% this year, is that Russian oil exports haven’t been sanctioned, and may not be.WTI crude rose about 1% Tuesday to just above $92 a barrel, but remains below the multi-year high of $95 set on Feb. 14.Traders have already priced in oil prices that could rise above $100 in the next month or so, so one prerequisite for further sharp declines in stocks is a further sharp rise in oil prices.John Kolovos, chief technical strategist at Macro Risk Advisors, thinks stocks will get hammered if oil hits $120 to $130, and there’s also the question of how fast oil will rise to those levels.The oil price hasn’t risen significantly yet to help keep stocks from falling to levels that could spook investors.At 4,305, the S&P 500 is still up 2% from its lowest level of the year, 4,222, hit in late January, after a wave of buying pushed it higher.Frank Cappelleri, chief market technician at Instinet, said 4,222 is a key level to watch, and if the S&P 500 breaks below it, it would signal growing pessimism about the economic outlook.For now, the crisis is a risk for stocks, but it hasn’t really unnerved investors yet.Article | barron’s writer Jacob line south Sean (Jacob Sonenshine) edit | | Guo Liqun translation small color copyright statement: barron’s (barronschina) original articles, without permission, shall not be reproduced.The Russia Issue Is Hurting The Stock Market. How Things Could Get Worse.(This article is for informational purposes only and does not constitute the provision or reliance of investment, accounting, legal or tax advice.)