Volatility continued to grip global financial markets, as U.S. stocks and oil swung wildly on headlines related to the war in Ukraine.

The S&P 500 closed down Tuesday, lurching lower in the last hour of trading on a day that saw the benchmark gain almost 2 per cent and drop as much as 1 per cent. The index plunged nearly 3 per cent Monday to close more than 12 per cent below its Jan. 3 record. Stocks, commodities, foreign currencies and sovereign bonds have been swinging wildly in the nearly two weeks since Russia invaded Ukraine, with investors hyper attuned to any change in sentiment that could force a recalibration of asset valuations.

“I don’t think the market’s ignoring anything at the moment, to be honest with you,” JJ Kinahan, chief market strategist at TD Ameritrade, said by phone. “In fact, everything is hyper-sensitive as to what may happen. It’s so fluid and we will see what happens. It’s really tough to predict day-to-day.”

The U.S. stock market is a cauldron of opposing bets linked to the war, its moves amplified by massive options positions which require constant re-balancing by dealers. Small upward and downward swings -- often touched off by erroneous or stale headlines -- quickly become big ones as market makers rush to buy and sell stocks to keep their books neutral, a process known as hedging gamma, a term for a type of derivatives volatility. It can amplify every news item, at times.

“We’re looking for any indication of peace,” said Peter Mallouk, president of Creative Planning, which has about US$230 billion in assets under management. Should markets get that news, “we’re going to see an extremely sharp recovery.”

The sanctions and war have roiled especially roiled commodities, sending oil surging along with materials from nickel to wheat. That is complicating the task for policy makers, who face a delicate balancing act in tightening to curb inflation without killing the economic recovery. Federal Reserve officials are set to meet on March 16 to review interest rates.

“We have a combination of soaring inflation and tightening financial conditions, and that is putting all of us in a bit of a bind, but it’s really putting the Fed into a bind,” said Kathy Jones, chief fixed-income strategist at Charles Schwab, on Bloomberg Surveillance. “I think the risk is more tightening than expected rather than less.”

Market expectations for a 25-basis-point rate hike next week and as many as six more this year would be “a big hill to climb right now given the tightening of financial conditions” she said.

Stocks briefly dipped to session lows and oil climbed as U.S. President Joe Biden announced a ban on imports of Russian fossil fuels including oil. The move will be matched by the U.K., which said it would ban oil imports, though it will continue to allow natural gas and coal from the country.

Treasuries held losses, with the 10-year yield earlier jumping along with its German counterpart following the report that the European Union is considering joint bond sales to counter the fallout from the war. The euro rose for the first time in more than a week against the dollar.

The proposal may be presented after the bloc’s leaders hold an informal summit in Versailles, France, that starts Thursday, according to officials familiar with the preparations. The move comes just a year after the EU launched an emergency package backed by joint debt to finance efforts to deal with the pandemic. Now, the bloc faces massive financing needs as it begins to reform its military and energy infrastructure.

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.7 per cent as of 4 p.m. New York time
• The Nasdaq 100 fell 0.4 per cent
• The Dow Jones Industrial Average fell 0.6 per cent
• The MSCI World index fell 0.7 per cent

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro rose 0.5 per cent to US$1.0906
• The British pound was little changed at US$1.3099
• The Japanese yen fell 0.3 per cent to 115.65 per dollar

Bonds

• The yield on 10-year Treasuries advanced eight basis points to 1.86 per cent
• Germany’s 10-year yield advanced 13 basis points to 0.11 per cent
• Britain’s 10-year yield advanced 14 basis points to 1.45 per cent

Commodities

• West Texas Intermediate crude rose 4.6 per cent to US$124.85 a barrel
• Gold futures rose 3.2 per cent to US$2,059.40 an ounce