Dow, S&P 500 drop 1% after major sanctions against Russia By Reuters

2/2© Reuters. Flags are seen outside the New York Stock Exchange (NYSE) in New York City, where markets roiled after Russia continues to attack Ukraine, in New York, U.S., February 24, 2022. REUTERS/Caitlin Ochs2/2

By Devik Jain and Uday Sampath Kumar

(Reuters) -Wall Street's main indexes slid in volatile trading on Monday, with bank stocks leading the drop as investors digested powerful Western sanctions against Russia.

Citigroup (NYSE:C) dropped 4.2%, dragging down the S&P 500 banks index by 2.4% as the U.S. 10-year Treasury yield slipped. The wider financial index fell 1.7%.

The weakness was somewhat offset by a 2.2% jump in the energy sector, fueled by higher oil prices. [O/R]

Global stocks slumped, the Russian rouble tanked to record lows and safe-haven assets got a boost after the Western allies imposed new sanctions that limited Moscow's ability to deploy its $630 billion foreign reserves and cut off some of its banks from the SWIFT global payments system.

"Investors are trying to digest the potential impact of the economic sanctions - that's really more dominant in investors thoughts than the actual potential for greater military conflict," said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.

Officials from Russia and Ukraine met for peace talks earlier in the day, but the meeting ended with no breakthrough. They will now return to their respective capitals for further consultations before a second round of negotiations.

"The talks lined up between the two sides would play into hope, and quite frankly, this market is not trading on anything other than hope and probabilities of situations playing out," said Andre Bakhos, managing director at New Vines Capital LLC in Bernardsville, New Jersey.

At 12:46 p.m. ET, the Dow Jones Industrial Average was down 393.37 points, or 1.15%, at 33,665.38, and the S&P 500 was down 47.13 points, or 1.07%, at 4,337.52.

The Nasdaq Composite fared better and was down 86.12 points, or 0.63%, at 13,608.51, helped by a 5.5% jump in Tesla (NASDAQ:TSLA) Inc and gains in cybersecurity stocks. Palo Alto Networks (NASDAQ:PANW), Fortinet (NASDAQ:FTNT), Zscaler (NASDAQ:ZS) and CrowdStrike Holdings (NASDAQ:CRWD) climbed between 2.5% and 4.8%.

"Year-to-date technology is the worst performer, and the market loves tech, so there's some bargain hunting in tech right now," Bakhos said.

The worsening geopolitical crisis has added to investor concerns over soaring inflation and the Federal Reserve's rate-hike plans, putting all the major U.S. stock indexes for their second straight month of losses.

The S&P 500 and the Nasdaq are set for their biggest two-month fall since the pandemic-led crash in March 2020.

The CBOE volatility index, also known as Wall Street's fear gauge, was last trading at 30.73.

Defense stocks Raytheon Technologies (NYSE:RTX), Lockheed Martin Corp (NYSE:LMT), General Dynamics Corp (NYSE:GD), Northrop Grumman (NYSE:NOC) and L3Harris Technologies (NYSE:LHX) gained between 2.7% and 6.8% following news that Germany would increase its military spending.

Delta Air Lines Inc (NYSE:DAL) dropped 4.7% to lead losses among the airline stocks after Russia closed its airspace to airlines from 36 countries in response Ukraine-related sanctions targeting its aviation sector.

First Horizon (NYSE:FHN) Corp surged 28.4% after TD Bank Group offered to acquire the U.S. bank in an all-cash deal valued at $13.4 billion.

Declining issues outnumbered advancers for a 1.33-to-1 ratio on the NYSE and for a 1.30-to-1 ratio on the Nasdaq.

The S&P index recorded 18 new 52-week highs and 4 new lows, while the Nasdaq recorded 40 new highs and 58 new lows.

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