Futures tracking the Nasdaq 100 Index signaled the U.S. equity gauge is poised to fall into a bear market for the first time since the pandemic as investors exit risk assets following Russia’s invasion of Ukraine.
March futures for the technology-heavy index were down 2.6% by 7:09 a.m. in New York after earlier sliding as much as 3.6%, as Russian forces attacked targets across Ukraine after President Vladimir Putin ordered an operation to demilitarize the country, prompting a threat of further “severe sanctions” on Moscow and sending markets tumbling around the world. S&P 500 futures dropped as much as 2.9%, while the European benchmark stock index sank 3.6%, poised for a technical correction.
Among the index’s most notable premarket movers, Apple fell 2.9%, Microsoft dropped 2.9%, Amazon.com shed 3.2%, and Alphabet dropped 2.8%. Meta Platforms sank 3.5%; the Facebook parent has underperformed for months, and the day’s slide will bring it near a 50% drawdown from a September peak.
The invasion is the latest risk to hit markets, following a rise in rates and persistent inflation, factors that have largely hit high-growth names.
“We’re not at a point where you can just jump in because everything is so cheap; it is extremely hard to call a bottom, and the geopolitical risk makes it even harder,” said Ivana Delevska, chief investment officer of SPEAR Invest.
The Nasdaq 100 has shed about 18% since notching its Nov. 19 closing record amid skyrocketing inflation, disappointing earnings and the prospect of conflict. Companies on the index have lost about $3.1 trillion in market capitalization so far this year as investors grapple with a double whammy for the sector in rising interest rates, which chip away at the value of future earnings, and slowing growth.
The broader Nasdaq Composite Index is teetering on the brink of bear territory -- measured as a decline of 20% or more for a stock index from a recent high, but some strategists said the selloff could have gone too far.
“The weakness in U.S. markets seems the most overdone with this move being sentiment- rather than economically-driven,” said Altaf Kassam, EMEA head of investment strategy and research at State Street Global Advisors. “The moves are inspiring us to add a little risk in a measured way. However, we are tempering this addition to risk with some tail risk hedges, notably in long duration U.S. Treasuries and VIX futures.”
Yields have soared on the prospect that the Federal Reserve will start withdrawing the massive monetary stimulus that has supported the U.S. financial system since the pandemic hit. Policymakers are fighting the largest consumer price spikes in a generation, but investors are dumping tech and growth stocks, whose valuations ballooned during the pandemic, as borrowing costs rise.
“Growth stocks had gotten incredibly loved and overvalued,” Eric Diton, president and managing director of The Wealth Alliance, said. “There was a feeling of intense speculation like with the tech bubble.”