Stocks finished lower Monday and oil prices moved sharply higher, as Federal Reserve Chairman Jerome Powell said the Fed needs to move quickly to raise interest rates and Russia's attack on Ukraine intensified.
The Dow Jones Industrial Average finished down 201 points, or 0.58%, to 34,552, while the S&P 500, which is down 6.4% finished off by just 0.04%. The tech-focused Nasdaq Composite fell 0.40%.
Powell, speaking at the Annual Economic Policy Conference of the National Association for Business Economics, said that between a strong job market and soaring inflation "there is an obvious need to move expeditiously to return the stance of monetary policy to a more neutral level."
The central bank announced the first interest rate increase since 2018, raising the benchmark rate to a range of 0.25%-0.5%.
With Russia's invasion, which began nearly a month ago as a "special operation" ordered by President Vladimir Putin, nearing the Ukrainian capital, United Nation's observers estimate that more than 10 million people have been displaced by the fighting, which has taken the lives of thousands of civilians as well as high-level figures in the Russian military.
However, with hopes of progress in talks between the two sides last week fading, investors are now left to ponder the impact of the war in both human and economic terms, with many retreating from risk markets and into cash and defensive positions.
Benchmark 10-year Treasury note yields rose to 2.304%, while 2-year notes were marked at 2.126%, putting the difference between the two at around 21.5 basis points, the lowest since the pandemic trough of April 2020.
Meanwhile, the U.S. dollar index, which tracks the greenback against a basket of six global currencies, gained 0.27% to to 98.50 as investors extend bets on faster Fed rate hikes while looking towards a slowdown in growth in the world's biggest economy.
The CME Group's FedWatch is pricing in a 41% chance of a 50 basis point hike in June, up from just 27% last week, while the Atlanta Fed's GDPNow forecasting tool suggests a modest 1.3% first quarter advance.
The defensive tone will take some of the steam out of last week's rally, the strongest five-day session for the S&P 500 since November of 2020, sparked in part by the long-awaited clarity from the Federal Reserve's interest rate hike and near-term policy path.
"After the major bounce last week, this week looks pivotal for whether this represents a significant shift or whether markets will continue to fret that the recent shocks will set the global economy and corporate profits on the path to recession," said Saxo Bank strategists.
Boeing (BA) shares slumped 3.6% following the crash of a 737-800 passenger jet operated by China's Eastern Airlines.
The six-year old plane was carrying 132 passengers, including crew, on a routine flight between Kunming to Guangzhou when it crashed into mountains in the southern region of the country, China's Civil Aviation Authority said at around 4 am Eastern time.
If fatalities are ultimately confirmed, it will be the first deadly crash of a commercial plane in China since 2010.
The incident could also add further delays to Boeing's return of the grounded 737 MAX aircraft in China, the world's biggest market, as investigators probe the circumstances behind Monday's disaster.
Alleghany Corp. (Y) shares, meanwhile, soared nearly 25% after Warren Buffett's Berkshire Hathaway (BRK.A) agreed Monday to buy insurance group for around $11.6 billion as the investment group adds to its 2022 acquisition run while quietly surpassing the $500,000 share price benchmark.
In other markets, global oil prices climbed higher again Monday, taking U.S. crude closer to $110 per barrel, as European officials mulled an embargo on Russia exports and rebel troops attacked a key pipeline in Saudi Arabia.
WTI futures for April delivery rose $7.81 in New York trading to change hands at $112.50 per barrel while Brent contracts for May were last seen $8.62 higher at $116.50 per barrel.
