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Market Snapshot: Stocks search for direction after Russia chaos, economic worries

U.S. stocks flipped between small gains and losses Monday, struggling for direction after last week’s pullback, as investors assessed the ramifications of a volatile weekend in Russia and jitters around the economic outlook.

What’s happening

  • The Dow Jones Industrial Average DJIA, +0.07% was up 21 points, or 0.1%, at 33,751.
  • The S&P 500 SPX, -0.28% was down 9 points, or 0.2%, at 4,340.
  • The Nasdaq Composite COMP, -0.87% fell 89 points, or 0.7%, to 13,404.

The S&P 500 fell last week, ending a streak of five straight weekly gains, while the Dow and Nasdaq Composite also pulled back. The S&P 500 and Nasdaq hit 14-month highs earlier this month.

See: Why the ‘easy money’ has been made in the stock-market rally — and what comes next

What’s driving markets

Financial markets had a relatively muted reaction to the past weekend’s revolt in Russia, though some analysts said the prospect of further internal strife after the incident could stoke volatility.

See: What’s next for markets after aborted Wagner mutiny leaves Russia’s Putin weakened

Gold futures GC00 rose and the yield on the 10-year Treasury BX:TMUBMUSD10Y fell as Yevgeny Prigozhin was reportedly headed for Belarus after his Wagner Group troops had headed toward Moscow in a challenge to Russian President Vladimir Putin. Prigozhin abruptly halted the mutiny on Saturday.

“So far, the markets appear to be taking a wait-and-see attitude toward the weekend’s eye-opening developments in Russia. But that element of geopolitical uncertainty unfolded just as the stock market suffered its first down week since mid-May as the Fed stuck to its hawkish script on interest rates,” said Chris Larkin, managing director for trading and investing at E-Trade from Morgan Stanley, in emailed comments.

While the human toll of the Russia-Ukraine war is staggering, the market reaction is largely a function of how the fighting affects commodity prices. The political upheaval over the weekend didn’t move oil or grain prices in a big way, with crude futures CL00, +0.75% up as Monday morning.

“For the most part, the market reaction was that there wasn’t anything new there that changed people’s thoughts about Putin’s credibility for very long,” said Tom di Galoma, managing director and co-head of global rates trading at BTIG in New York. “The markets sloughed it off pretty quickly.”

Worries about the global economy continued after a sharp drop in the German Ifo business climate index for June. The closely watched gauge declined to 88.5 in June from 91.5 in May, according to data from the Ifo Institute published Monday. The reading fell short of expectations for a 90.5 reading from economists polled by The Wall Street Journal.

A flurry of rate hikes by European central banks last week heightened worries about growth. Meanwhile, Federal Reserve Chair Jerome Powell reiterated that a strong majority of policy makers were in favor of two more quarter-point rate increases, after the central bank opted to leave its fed-funds rate unchanged earlier this month.

“With Fed chief Powell reminding everyone the inflation fight is a long way from being over — and that the Fed could raise rates another 0.5% before they call it quits — every inflation data point will be closely scrutinized,” said E-Trade’s Larkin.

That includes Friday’s personal-consumption expenditures index, the Fed’s preferred inflation measure, and the June jobs report next week, he said, which “could determine whether last week’s pullback remains just that or turns into something bigger.”

Companies in focus

Steve Goldstein contributed.

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