Nasdaq futures slightly lower as Wall Street weighs Russia-Ukraine tensions, possibility of Fed rate hike

Futures fell slightly on Sunday evening as investors continued to monitor growing tensions between Ukraine and Russia and the possibility of a Fed rate hike.

Futures tied to the Dow Jones Industrial Average inched 23 points higher, or 0.07%. S&P 500 futures fell 0.02% and Nasdaq 100 futures lost 0.2%.

The moves come after a difficult week for equities, which has been pressured by hot inflation report and fear of a Russian attack on Ukraine. The Dow and S&P 500 are down 1% and 1.8%, respectively, for the week. The tech-heavy Nasdaq Composite is down more than 2%.

On Friday, the Dow fell 503.53 points, or 1.43%. The S&P 500 fell 1.9% and the Nasdaq Composite dropped 2.8%. The drop comes as the White House warned that a war in Ukraine could start “any day” and urged Americans there to leave “immediately”. Oil prices rose on Friday, along with traditional safe-havens like Treasuries.

“The real fear is that China backs Russia and the relationship between China and the US continues to deteriorate,” said Robert Cantwell, chief investment officer at Upholdings. “The way it changes the relationship of the United States with other economic superpowers – that is what is really scary and will affect the economic outcome.”

A phone call last weekend between the President of the United States Joe Biden and the President of Russia Vladimir Putinin which Biden tries to stop Putin from attacking Ukraine, no breakthrough.

Some airlines also have suspending or diverting flights to Ukraine amid the brewing crisiswhile the Pentagon gives orders the departure of US troops in Ukraine.

Traders are also weighing the potential impact of rising inflation on the US economy, as well as potential measures the Federal Reserve could take to quell the upside momentum.

The Labor Department reported last week that inflation in January jumped 7.5%, the biggest gain since 1982. Rate-sensitive tech stocks were hit hard by the report, in then briefly the 10-year Treasury yield rose above 2% – the first time since 2019 that the 10-year term traded above that level.

Following the release of the report, Fed President St. Louis James Bullard says he is open to a 50 basis point rate hike next month, adding that he wants to see the full percentage increase in July. To be sure, San Francisco Fed President Mary Daly said Sunday that the central bank should take a “measured” approach when raising interest rates.

“Last week, the main story was about inflation,” Cantwell said. “Every time the inflation numbers come out, it continues to beat expectations, and even though the Fed has signaled that they’re going to raise rates, they haven’t actually raised them yet.”

Economists at Goldman Sachs also raised their Fed forecast to seven increases for 2022, and said it expects a 10-year increase of 2.25% this year.

The firm also lower the S&P 500 in 2022 price target from 5,100 to 4,900. That would represent only a 2.8% return over the benchmark ending in 2021. Goldman says a higher rate would disrupt valuation.

Earnings are expected to rebound this week, with Nvidia, Walmart, Shopify, AMC and more scheduled to report.