World News: The Daily Money: Ukraine invasion's impact on natural gas, stocks

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Friday, February 25

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Happy Friday, Daily Money readers. Jayme Deerwester, here with you. Well, we made it through another cold, soggy week.

🗞 Understanding the news: Russia, Ukraine and the stock market 🗞

As Russia invades Ukraine and global markets waver, U.S. financial markets are flashing a key warning: they're in a correction. But what exactly is that?

A correction is a 10% drop in stocks from their most recent high. And since peaking in early January, that's exactly what the S&P 500 index, the broadest gauge of the U.S. stock market, has fallen into.

While there's been "a fairly broad-based sell-off" in the financial markets since the beginning of this year, the S&P had been holding up well, said Ed Yardeni, president of global investment firm Yardeni Research. "But the developments in Ukraine are weighing significantly across the board," he said.

And while some stocks may look like a bargain during the sell-off, market analysts say investors should proceed with caution, warning that stocks could slide even further as Russian forces burrow deeper into Ukraine.

"As discomforting as the headlines are, from an investment perspective, we would urge investors not to overreact," said Keith Lerner, co-chief investment officer at Truist Advisory Services. "It's important to recognize that the markets have tended to eventually rebound following geopolitical events, and snapbacks from corrections tend to be very sharp."

On the flip side, now is a good time to think about buying tech stocks, Daniel Ives and John Katsingris, analysts at Wedbush, said in a note.

Pay attention to cyber-stocks, they advised: "With a significantly elevated level of cyber-attacks now on the horizon, we believe added growth tailwinds for the cyber security sector and well-positioned vendors should be a focus sector for tech investors during this market turmoil," they added.

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💡 Daily insight 💡

President Biden on Thursday announced a new round of sanctions against Russia after its invasion of Ukraine hours earlier. But one move the president didn't announce on Thursday was kicking Russia out of the SWIFT financial system , telling reporters that the penalties proposed are of "maybe more consequence than SWIFT."

SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication. It is a global messaging system connecting thousands of financial institutions around the world.

SWIFT was formed in 1973, and it is headquartered in Belgium. It is overseen by the National Bank of Belgium, in addition to the U.S. Federal Reserve System, the European Central Bank and others, NBC News reported. It connects over 11,000 financial institutions in more than 200 countries and territories worldwide, telling banks about transactions.

Alexandra Vacroux, executive director of the Davis Center for Russian and Eurasian Studies at Harvard University, previously told NPR, that "It doesn't move the money, but it moves the information about the money."

Barring Russia from SWIFT would damage the country's economy right away and, in the long term, cutting Russia off from a swath of international financial transactions. That includes international profits from oil and gas production, more than 40% of Russia's revenue.

Iran lost access to SWIFT in 2012 as part of sanctions over its nuclear program, though many of the country's banks were reconnected to the system in 2016. Vacroux, executive director of the Davis Center for Russian and Eurasian Studies at Harvard University told NPR, "they lost half of their oil export revenues and 30% of their foreign trade."

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🎶 Mood music 🎶

Today, I'm going with a Police classic, "Spirits in the Material World": "Where does the answer lie? Living from day to day. If it's something we can't buy, there must be another way."

LISTEN WHILE YOU WORK: Remember, you can listen to this song and every track I've quoted in the newsletter in the Daily Money Mood Music playlist on Spotify.