More volatility expected on Wall Street amid Ukraine tensions, Fed tightening

NEW YORK, Feb. 25 (Xinhua) -- U.S. equities reversed their earlier massive losses to finish higher on Thursday, snapping a four-day losing streak. But, it is not yet the time for investors to pop the champagne.

Analysts cautioned that continued volatility is expected amid uncertainty over the Ukraine crisis coupled with policy tightening from the U.S. Federal Reserve.

The news that the Russia-Ukraine tensions have escalated into a military conflict overnight caused Wall Street to open Thursday's session with a plunge.

The Dow Jones Industrial Average then managed to close up 92.07 points, erasing an 859-point plunge. The S&P 500 climbed 1.50 percent, after falling as far as 2.6 percent earlier in the session. The Nasdaq Composite Index increased 3.34 percent, after shedding nearly 3.5 percent at the session low.

Despite the stunning reversal, the S&P 500 remained in correction territory, down more than 10 percent from its record close set on Jan. 3. The tech-heavy Nasdaq was still about 16 percent off from its November closing record.

"I think today was a knee-jerk reaction. You saw a margin selling on the opening, and then the market firmed up after that," Larry Benedict, CEO &founder of The Opportunistic Trader, a U.S. market research firm, told Xinhua.

It was "relief rally in very very beaten-down stocks," he said, noting that "the market is not out of the woods."

"The bottom line is that you will see a lot more volatility," as uncertainty remains high over the Ukraine tensions, said the analyst.

The Cboe Volatility Index, widely considered as the best fear gauge in the stock market, hovered above 30.

"Heightened volatility on the escalation of the conflict shows markets had not fully priced in the likelihood of deeper conflict. We expect continued volatility in the near term as leaders calibrate and announce their response to this escalation," Mark Haefele, chief investment officer at UBS Global Wealth Management, said Thursday in a note.

U.S. President Joe Biden announced on Thursday additional sanctions against Russia and the deployment of more troops to Europe as conflicts in Ukraine continue to evolve.

Meanwhile, Biden reiterated that "our forces are not and will not be engaged in the conflict with Russia in Ukraine, our forces are not going to Europe to fight in Ukraine but defend our NATO allies and reassure those allies in the east."

The announcement was made hours after leaders of the Group of Seven (G7) countries met virtually to coordinate their responses to Russia's military actions in Ukraine.

"The current situation is being complicated by high inflation at home, which includes soaring energy prices, and the fact that the Fed is expected to make their first interest rate hike in years with a fair amount of uncertainty whether it will be a quarter point or half point to begin with," said Kevin Matras, executive vice president at Zacks Investment Research.

The Fed signaled last month that the central bank is ready to begin a series of interest-rate hikes in March to combat surging inflation as it exits from the ultra-loose monetary policy enacted at the start of the COVID-19 pandemic.

According to the CME Group's Fedwatch tool, investors are betting that there is a 100-percent chance of a rate hike at the Fed's March meeting.

"The market is in no means in good shape," between the Ukraine situation and tightening Fed policy," said Benedict, adding investors are recommended to invest or trade "very cautiously" and "much more nimbly."

"We think it is important for investors to maintain a calm stance and keep a broad perspective, and to build a portfolio robust enough to navigate the Ukraine crisis and rising U.S. interest rates," said analysts at UBS.