Stocks slide as Fed, Russia keep traders on edge

The historic rebound in American stocks proved short-lived, with major averages slumping again as investors remained on edge over the Federal Reserve’s inflation-fighting stance and Russia’s saber-rattling against Ukraine.

The historic rebound in American stocks proved short-lived, with major averages slumping again as investors remained on edge over the Federal Reserve’s inflation-fighting stance and Russia’s saber-rattling against Ukraine.

Just a day after an almost incredible recovery for the S&P 500 from a 4 per cent rout, the U.S. benchmark gauge resumed its losses. While the gauge traded off its worst point of the day, it still headed toward its lowest level since October. The Nasdaq 100 tumbled more than 3 per cent. Amid violent equity swings, the Cboe Volatility Index extended its surge into a sixth consecutive day, and was poised for a one-year high. The dollar rose, while 10-year Treasuries were little changed.

The risk of a “growth shock” to equities is increasing, according to Goldman Sachs Group Inc. strategists. Ahead of Wednesday’s Fed decision that’s expected to point toward a rate hike in March, they warned that sharp monetary tightening to tame inflation could eventually have knock-on effects on economic activity, hurting stocks. The International Monetary Fund cut its world growth forecast for 2022, citing weaker prospects for the U.S. and China along with persistent inflation.

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Evidence emerged that European governments are split on what Russian actions short of a military attack on Ukraine should trigger sanctions. A Kremlin spokesman warned that a U.S. move to put as many as 8,500 troops on alert “exacerbates tensions,” as a top White House official said the reinforcements for North Atlantic Treaty Organization forces in Eastern Europe are “ready to go at a moment’s notice.”