Russia-Ukraine Conflict and Fed Rate Hikes Might Continue to Drag S&P 500 Lower

Author: Finscreener

Estimated read time: 3 minutes

Publication date: 20th Feb 2022 22:27 GMT+1

In the last week, the S&P 500 Index fell by 1.3% which suggests the world’s most popular index is down 9.5% from all-time highs. Further, the NASDAQ Index and Dow Jones Index are down 14.4% and 6.5% from record highs respectively.

According to market experts, the turbulence surrounding equity markets will continue in the near term given multiple macro-economic factors such as the ongoing conflict between Russia and Ukraine, the threat of new COVID-19 variants, the possibility of interest rate hikes, and inflation that’s near multi-year highs.

In an interview with CNBC, Jim Paulsen, chief investment strategist at The Leuthold Group claimed that the stock market was all set to break out higher before Russia escalated issues with Ukraine. In fact, Russia is prepared to carry out additional drills near Ukraine’s border as the European Union and the U.S. look to resolve the threat of invasion diplomatically.

Paulsen stated the stock market was gaining pace despite inflation and interest rates. He said, “The market was OK with it. Russia brought it all down. Now you are in a situation where if we break low enough, we have to break that low. As an investor, that leaves you hanging there, and technically you have to wonder if we’re going down to test that low. I don’t know about the next 60 days, but the next six months should be good.”


What next for the S&P 500 and investors

The Russia-Ukraine may be resolved resulting in a knee-jerk reaction and driving indices temporarily higher. However, even if Russia’s threat fades, markets will remain volatile given the Federal Reserve will start raising interest rates higher from March.

In fact, analysts expect interest rates to be hiked between four and seven times in 2022. In 2018, the indices responded negatively to Fed’s dovish stance when the S&P 500 and Nasdaq fell by 20% and 24% respectively.

Investors will also be closely following macro data such as durable goods and consumer sentiment which will be published in the following week. Personal consumption expenditures data is also expected this week.


DraftKings stock slumped over 21% on Friday

Shares of sports betting company DraftKings (NASDAQ: DKNG) fell 21.6% on Friday, February 18, following its Q4 results, which means the stock is now 76% from all-time highs. However, the company CEO

Jason Robins attributed the decline to an unstable stock market. Robins emphasized, “I’m very confident that once the market settles down and rationality kicks back in, that the metrics we’re putting out there will start to resonate. But in the meantime, we’ve just got to keep doing our thing and hopefully the market will catch on.”

DraftKings reported revenue of $473 million, much higher compared to analyst estimates of $445.3 million. It also raised revenue guidance for 2022 from between $1.7 billion and $1.9 billion to between $1.85 billion and $2 billion, compared to Wall Street estimates of $1.9 billion.

However, its adjusted EBITDA loss forecast of between $825 million and $925 million was much more than analyst loss estimates of $572.2 million.


Shopify stock declined 22% in the last week

Shares of Canada-based e-commerce giant Shopify (NYSE: SHOP) plunged close to 23% in the last week after the company reported Q4 earnings and indicated pandemic tailwinds have evaporated. While top-line growth is forecast to decelerate in 2022, Shopify is also expected to increase capital expenditures significantly going forward.

It aims to make its platform attractive to businesses and will ramp up investments to build a comprehensive network of fulfillment warehouses. Shopify is focusing on vertical integration which will help it lower costs, enhance quality control and improve efficiencies over time.

Disclaimer: The writer is an experienced financial consultant who writes for The observations he makes are his own and are not intended as investment or trading advice.