The Federal Reserve is unlikely to back off raising interest rates starting at its March meeting as it wrestles with trying to fight red-hot inflation against the backdrop of Russia invading Ukraine.
"The current situation is different from past episodes when geopolitical events led the Fed to delay tightening or ease because inflation risk has created a stronger and more urgent reason for the Fed to tighten today than existed in past episodes," said Goldman Sachs Chief Economist Jan Hatzius in a new research note. "With some signs of problematic wage-price dynamics emerging and near-term inflation expectations already high, further increases in commodity prices might be more worrisome than usual. As a result, we do not expect geopolitical risk to stop the FOMC from hiking steadily by 25bp at its upcoming meetings, though we do think that geopolitical uncertainty further lowers the odds of a 50bp hike in March."
Markets continue to crumble under the rate fear concerns expressed by Goldman and the developing situation between Ukraine, Russia and the West.
Wednesday's trading session marked the second sloppy close for the markets in a row. The S&P 500 wiped out early advances to trade sharply lower in afternoon trading. By the close of trading, the S&P 500 hovered at an eight-month low. The major index remained in correction zone, accruing a loss of more than 10% from its recent peak.
Roughly 85% of the stocks that comprise the S&P 500 lost value in the sessions.
As for the Dow Jones Industrial Average, only two components finished in the green: Johnson & Johnson and Chevron. Momentum names such as Tesla, Netflix and Rivian continued to hemorrhage value compared to their 52-weeks high (see tweet below).
Where some stocks are right now vs their 52-week high:
• $AAPL: -12.6%
• $AMZN: -23.4%
• $NVDA: -35.4%
• $TSLA: -38.8%
• $NFLX: -47.5%
• $ARKK: -56.5%
• $LCID: -58.6%
• $NIO: -62.8%
• $PLTR: -64.4%
• $RIVN: -68%
• $CRSP: -68.6%
• $BYND: -71%
• $HOOD: -87.2%— Sawyer Merritt 📈🚀 (@SawyerMerritt) February 23, 2022
Meanwhile, a dire prediction on commodities against an already inflationary backdrop also weighed on the minds of traders.
"It's the exact same setup as we had back then," Goldman Sachs' global head of commodities research Jeffrey Currie said on Yahoo Finance Live, referring to Goldman's now legendary "super spike" call on oil prices from 2005.
Currie didn't rule out another super spike in commodities prices, and sees exposure to the space as key for investors right now.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, YouTube, and reddit