Stocks Fall as Fighting Continues and Sanctions Deepen; Talks Open at Border

Stocks around the world fell as fighting in Ukraine continued, while talks aimed at ending the war opened and sanctions began hitting Russia’s financial system. Additional sanctions were imposed on Russia by Western leaders, including removing some key Russian banks from the SWIFT system. Prices of commodities sensitive to Eastern Europe geopolitics—oil, gas, and grains—rose.

Russia’s central bank more than doubled its key interest rate to 20% in reaction to a plunging ruble. The Russian currency fell nearly 30% against the U.S. dollar in reaction to sanctions.

Last week, U.S. stocks had rebounded from a sharp sell-off. On Friday, the Dow rose over 2.5%, the S&P 500 gained 2.2% and the Nasdaq added 1.6%. For the week, the S&P 500 rose 0.8%, the Dow fell 0.1% and the Nasdaq rose 1.1%. 

Government bond yields moved sharply lower, while prices, which move inversely to yield, rose. The yield on the 10-year Treasury note fell to 1.92%, as investors sought safe-haven investments. Oil prices rose more than 5%, with light sweet crude trading above $96 a barrel. Brent crude futures were above $102 a barrel. The price of Bitcoin was up over 1%, above $38,000. 

Later this week, Federal Reserve Chair Jerome Powell will testify before Congress about the economy and monetary policy. On Friday, the government will release its latest jobs report. U.S. payrolls are expected to increase by 450,000 after rising by 467,000 in January. The unemployment rate is forecast to have risen by 3.9% in February, following a 4% gain in January. 

Later this morning, the Institute for Supply Management releases the Chicago Purchasing Managers Index for February. Economists expect a reading of 63, two points less than the January reading.  

Companies reporting earnings today include HP Inc., Lucid Group Inc. (LCID), Workday Inc. (WDAY), and Zoom Video Communications Inc. (ZM). Others later this week include Target Corp. (TGT), Nordstrom Inc. (JWN), Dollar Tree Corp. (DLTR), and Best Buy Inc. (BBY).

Today’s Headlines: Quick Hits

SpaceX’s Starlink satellite internet service has been activated in Ukraine, according to CEO Elon Musk. The move follows power outages in Ukraine after Russia’s invasion.

Norway’s sovereign wealth fund will vote against Apple Inc.’s (AAPL) management’s pay plan that will pay CEO Tim Cook $82 million in stock awards. The $1.3 trillion fund is the world’s largest, and owns over 1% of Apple’s stock. 

Chinese electric car maker NIO plans to list in Hong Kong on March 10. The move comes as regulatory risks grow in the U.S. and China for Chinese companies listed in New York.

The U.S. Securities and Exchange Commission (SEC) unveiled a pair of proposals broadening the data short sellers must disclose about their bets that stocks will fall. The new rules would offer the public visibility into data around large short positions for individual stocks.

China’s Huawei has launched a rival to Amazon.com Inc.’s (AMZN) Kindle e-reader. The company’s MatePad Paper and other new products could give a boost to its consumer division that has been hurt by U.S. sanctions.

Lordstown Motors Corp. (RIDE) will release its fourth-quarter results. The company is expected to provide guidance on the production of its electric truck, which was delayed earlier because of supply chain issues.

The Big Story: BP Exits Stake in Russian Oil Company

BP Plc (BP) is exiting its partnership with Russian energy company Rosneft Oil Co., citing Russia’s recent moves against Ukraine. BP’s traded shares fell more than 7%, though shares are up about 12% so far this year, and are about 25% higher over the past year.

BP has held a 20% stake in Rosneft since 2013, and has operated in Russia for over 30 years. The company had been under pressure from U.K. officials who expressed concerns about BP’s stake. BP now faces a potential loss of as much as $25 billion to sell the stake, which is valued at about $14 billion.

BP currently relies on Rosneft for about one-third of its oil and gas production. BP will also no longer count on dividends from Rosneft. Those dividends brought BP about $640 million last year, and dividends in 2022 could be worth over $1 billion. The oil giant could also be hit with $11 billion in foreign exchange losses on BP’s books.

BP is one of the most exposed major oil and gas companies to Russia. The company said yesterday it was still on track to spend about $4 billion a year through 2025 on stock buybacks.