S&P 500 Retreats From Session Highs Amid Rising Geopolitical Tensions

Key Insights

• Several missiles landed in Poland, a NATO member. 
• Ukraine halted oil transit from Russia to Hungary. 
• Traders rush to buy safe-haven assets, but it remains to be seen whether the pullback in stocks will be sustainable. 

Traders Take Profits As Geopolitical Tensions Increase

S&P 500 pulled back from session highs after several missiles landed in Poland, killing at least two people. Poland called an urgent meeting of a committee for national security and defense affairs. At this point, Poland has not revealed what it planned to discuss. However, it is obvious that Poland will evaluate whether these missiles came from Russia, which delivered significant strikes against Ukrainian energy infrastructure today.

Poland is a NATO member, so markets react to the potential increase in geopolitical tensions. Not surprisingly, traders rushed to buy safe-haven assets. The U.S. Dollar Index pared losses and moved towards the 107 level. Gold also received support from rising safe-haven demand and moved back above the $1775 level.

WTI oil moved towards the $88 level as Hungary called its security council to discuss Ukraine’s decision to stop the transit of oil from Russia via the “Druzhba” pipeline. These developments may provide significant support to oil stocks in the upcoming days.

Geopolitics aside, the market has been bullish today as Walmart presented strong third-quarter results, raised guidance and announced a $20 billion buyback program.

The key question is whether the U.S. stock market will be sensitive to the recent geopolitical developments. In the near term, some traders may want to take profits off the table after the recent rally.

In the longer term, the halt of oil supplies from Russia to Hungary may present a serious problem and boost oil markets at a time when G7 countries prepare to impose a price cap on Russian oil. Higher oil prices boost inflation, which may lead to a more hawkish Fed and hurt stocks.

S&P 500 Faced Strong Resistance Near 4040

Currently, S&P 500 is trying to settle below the 3960 level. In case this attempt is successful, it will move towards the next support level, which is located at 3920. A successful test of the support at 3920 will push S&P 500 towards the support level at 3885.

On the upside, the nearest resistance level for S&P 500 is located at 4000. If S&P 500 climbs above this level, it will move towards the resistance at 4015. A successful test of this level will open the way to the test of the resistance at 4040.

For a look at all of today’s economic events, check out our economic calendar.