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Investing.com – – The S&P 500 slumped Friday, as reports that Russia was in position to launch a full scale invasion of Ukraine at any time triggered risk-off across markets just as investors were weighing up the prospect of aggressive U.S. rate hikes ahead.
The S&P 500 fell 2%, the Dow Jones Industrial Average lost 1.4%, or 503 points, the Nasdaq fell 2.8%.
U.S. National Security Jake Sullivan told reporters on Friday that the U.S. is not claiming that Putin has made a final decision to invade Ukraine. An earlier report by PBS suggested the Russian president had already made a decision to invade.
“We are not saying that a decision has been taken a final decision has been taken by President Putin … what we are saying is that we have a sufficient level of concern based on what we are seeing on the ground [at the Ukraine border],” Sullivan said.
The national security advisor, however, emphasized the elevated threat of a Ukraine invasion that could begin “any day now,” as Russia had all the forces at the border that it needs to conduct a major military action.
An earlier report from PBS suggested that the Russian president had instructed his military to move ahead with the Ukraine invasion, with two administration officials reportedly saying an invasion was expected to begin next week.
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The report of a decision from Putin arrived just after U.S. Secretary of State Antony Blinken said that Russia had beefed up its forces at the border with Ukraine and could launch an invasion at any time.
Investors opted for safety, piling into U.S. bonds pushing yields lower, with the U.S. 10-year yield retreating below 2% while expectations for potential disruptions in the oil supplies boosted oil prices.
Defense stocks, meanwhile, including Lockheed Martin (NYSE:LMT) (NYSE:LMT), and Northrop Grumman (NYSE:NOC) (NYSE:NOC) were higher.
Stocks started the day under pressure as investors weighed up the prospect of the Federal Reserve moving faster and more aggressively on rate hikes following St. Louis Fed President James Bullard’s hawkish remarks on the heels of red-hot inflation report released Thursday.
Bullard said he was in favor of the Fed hiking rates by a full percentage point by July, and also backed hikes in between Fed meetings.
“Every data point like the inflation report we had yesterday confirms that inflation is a large and growing issue for the markets,” Every one of those data points continues to reinforce how the Fed arguably is behind the curve,” Chief Market Strategist David Keller at StockCharts told Investing.com in an interview on Friday.
Growth sectors of the market like tech led the broader market selloff as investors weighed up the growing prospect of the Fed raising rates by 50 basis point rate at its next meeting in March.
“The reality of what a rising rate environment means for growth stocks and how difficult it will most likely be for growth stocks to outperform given that general headwind is a reality that a lot of investors, especially ones that are newer, don’t recognize,” Keller added.
Meta Platforms (NASDAQ:FB), Amazon.com (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), and Alphabet (NASDAQ:GOOGL) ended the day in the red.
With tech in the crosshairs once again, value sectors such as financials and energy have been touted as the place to hide in an inflationary and rising environment. But the recent run up in financials, up 2.6%, and energy up 27%, especially the latter is due for a pullback, which would likely be bought on the dip.
“Energy will probably have to pull back a bit, but overall, those sectors [financials and energy] still remain the sectors with the highest probability of outperforming,” according to Keller.
