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Dow futures plunge more than 700 points after Russia announces attack on Ukraine

U.S. stock futures plunged Wednesday night after Russian President Vladimir Putin announced Russian troops would enter Ukraine. The drop follows a tumultuous day on Wall Street that saw all three major benchmarks log their lowest levels this year so far as Russia-Ukraine tensions continued to weigh on investor sentiment.

Markets have been wrought this week with what appeared to be dwindling prospects of a resolution to the geopolitical conflict between Russia and Ukraine. President Joe Biden on Tuesday unveiled the “first tranche” of financial sanctions targeting Russia in response to Vladimir Putin’s move to recognize the independence of two pro-Moscow separatist republics in east Ukraine and deploy troops into the areas — a move seen by Western countries as a provocation and breach of international law.

European allies acted in lockstep to reprimand Russian aggression. Germany halted approval of the Nord Stream 2 natural gas pipeline that would have deepened western Europe’s energy link to Russia, the world’s largest natural gas exporter. Fears of other energy-linked sanctions sent crude oil prices to a seven-year high and Brent crude towards $100 per barrel.

“Putin knew these were going to be coming,” CSIS International Security Program senior adviser Mark Cancian told Yahoo Finance Live. “He took his move anyway, so it’s unlikely that they will deter him.”

Risk assets slid on Tuesday as investors considered the financial market implications of an escalating threat of military attack and greater sanctions on Russia. As European allies also coordinated their response to Russia’s increased military presence in and around Ukraine, Germany halted approval of the Nord Stream 2 natural gas pipeline that would have deepened western Europe’s energy link to Russia, the world’s largest natural gas exporter. Crude oil prices spiked to a seven-year high, and Brent crude neared $100 per barrel as investors contemplated the potential for further energy-linked sanctions on Russia, the third-largest oil producer in the world.

In the U.S., the conflict creates an added headwind for investors already grappling with a hawkish shift in Federal Reserve policy to intervene more aggressively in mitigating inflationary pressures. A war between Russia and Ukraine threatens to exacerbate already surging prices and spur other economic disruptions that could complicate the Fed’s policy-making choices.

Many strategists have argued that despite the weight of geopolitical turmoil on equities, the risk-off mood among traders stems primarily from worries around interest rate hikes.

Russian President Vladimir Putin takes part in a wreath laying ceremony at the Tomb of the Unknown Soldier by the Kremlin Wall on the Defender of the Fatherland Day in Moscow, Russia February 23, 2022. Sputnik/Aleksey Nikolskyi/Kremlin via REUTERS ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY A THIRD PARTY.

Russian President Vladimir Putin takes part in a wreath laying ceremony at the Tomb of the Unknown Soldier by the Kremlin Wall on the Defender of the Fatherland Day in Moscow, Russia February 23, 2022. Sputnik/Aleksey Nikolskyi/Kremlin via REUTERS ATTENTION EDITORS – THIS IMAGE WAS PROVIDED BY A THIRD PARTY.

“So far, it looks like Ukraine is not the reason for the drop, despite the fears,” Commonwealth Financial Network Chief Investment Officer Brad McMillan said in a note.

“But what has pulled the markets down, if not the Ukraine crisis?” McMillan wrote. “The most likely candidate—one which makes both fundamental and mathematical sense — is higher interest rates”

Brad McMillan points out that since the start of the year, the 10-Year U.S. Treasury yield is up from 1.63% to 1.97% at an increase of 34 basis points, or 21%. Typically, higher yields mean lower valuation, pushing the forward price/earnings ratio for the S&P 500 from roughly 22.35 at the end of 2021 to an estimated 19.1, a 15% decline.

“After adjusting for earnings beats this quarter, that drop in valuations pretty much explains the drop in the market, and that rationale doesn’t leave much, if any, room for worries about Ukraine,” McMillan noted. “Wall Street, then, seems to be much more worried about Fed Chairman Jay Powell than Vladimir Putin, at least at the moment.”

10:57 p.m. ET: Dow futures plunge more than 700 points after Russia announces troops to enter Ukraine

Here were the main moves in markets in extended trading Wednesday as of 11:02 p.m. ET:

  • S&P 500 futures (ES=F): -87.75 points (2.08%), to 4,134.25

  • Dow futures (YM=F): -709.00 points (-2.14%), to 32,357.00

  • Nasdaq futures (NQ=F): -340.25 points (-2.52%) to 13,167.25

  • Crude (CL=F): +$2.65 (+2.88%) to $94.75 a barrel

6:00 p.m. ET: Futures open flat after S&P 500, Dow and Nasdaq notch fresh 2022 lows

Here were the main moves in markets in extended trading Wednesday:

  • S&P 500 futures (ES=F): +0.50 points (+0.01%), to 4,222.50

  • Dow futures (YM=F): +23.00 points (+0.07%), to 33,089.00

  • Nasdaq futures (NQ=F): +2.75 points (+0.02%) to 13,510.25

  • Crude (CL=F): +$0.56 (+0.61%) to $92.66 a barrel

  • Gold (GC=F): +$1.40 (+0.07%) to $1,911.80 per ounce

  • 10-year Treasury (^TNX): +2.9 bps to yield 1.9770%

Traders work on the floor of the New York Stock Exchange at the opening bell on February 22 2022, in New York. - Wall Street stocks retreated early on February 22 as Russian President Vladimir Putin's latest escalation of the Ukraine conflict stoked volatility in markets. (Photo by TIMOTHY A. CLARY / AFP) (Photo by TIMOTHY A. CLARY/AFP via Getty Images)

Traders work on the floor of the New York Stock Exchange at the opening bell on February 22 2022, in New York. – Wall Street stocks retreated early on February 22 as Russian President Vladimir Putin’s latest escalation of the Ukraine conflict stoked volatility in markets. (Photo by TIMOTHY A. CLARY / AFP) (Photo by TIMOTHY A. CLARY/AFP via Getty Images)

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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