The stock market faces another turbulent week, as investors watch the situation in Ukraine and continue to adjust portfolios ahead of the Federal Reserve’s interest rate hikes.

Stocks were rocked in both directions in the past week, with the Dow Jones Industrial Average seeing its worst day of the year Thursday. The three major averages slumped Friday afternoon, and all three are on pace for losses of more than 1% on the week. Tech, energy and consumer discretionary were among the worst performing sectors during trading on Friday.

A few Fed speakers are on the calendar in the four-day week ahead, including Cleveland Fed President Loretta Mester and Fed Governor Christopher Waller Thursday. Earnings continue to roll in, including reports from retailers Macy’s and Home Depot. There are also a number of economic reports, including durable goods, consumer spending and inflation data.

“Maybe the biggest issue [for the market] next week is technical,” said Jim Paulsen, chief investment strategist at The Leuthold Group.

The market continued to fluctuate with developments surrounding Russia’s threat to invade Ukraine and its build-up of troops along the Ukraine border.

“The problem with Russia, is what’s the end game? It could just go on forever… When you look ahead, the thing that’s going to change this is if they go in or there’s a total pullout, and what’s going to bring a pullout any time soon,” Paulsen said.

He said stocks had looked set to break out higher before Russia’s threat against Ukraine started to weigh on the market. About two weeks ago, the S&P 500 tried to retake 4,600 after touching a low of 4,222 on Jan. 24.

“It was doing that despite all the Fed stuff and inflation. The market was okay with it. Russia brought it all down. Now you are in a situation where if we break low enough, we have to break that low,” said Paulsen.

On Friday, Russia prepared to carry out more drills near Ukraine’s border, while the U.S. continued to press for a diplomatic solution.

“As an investor, that leaves you hanging there, and technically you have to wonder if we’re going down to test that low,” said Paulsen. “I don’t know about the next 60 days, but the next six months should be good.”

Chart analysis is not guaranteed to predict the path of the market, but many investors set their sights on key technical levels since so many investors react to them and algorithms are programmed around them. They also become a guide when fundamentals are very uncertain.

Watching the charts

Scott Redler, chief strategic officer at T3Live.com watches the short-term technicals. He sees a good chance that the S&P 500 revisits that January low in a retest.

“The narrative for this year is inflation, and the Fed removing accommodation. We may get a knee-jerk reaction on the Russia-Ukraine situation,” said Redler. He said even if the Russian threat fades, the market could still face volatility as the Fed moves to raise interest rates starting in March.

“That doesn’t solve the problem of four to seven rate hikes this year and the run-off of the balance sheet,” he said, adding the market has responded negatively to Fed tightening in the past. “In 2018, the S&P fell 20% and the Nasdaq fell 24%. So why wouldn’t the S&P test the 4,222 area?”

Redler and other technical analysts are watching a bearish pattern on the chart of the S&P 500 that would suggest the index could form a “head-and-shoulders” pattern, which could bring even more volatility.

“It’s a distribution pattern, which is what the market’s been doing over the past month as it builds the right shoulder,” said Redler. He said the neckline on the chart would be around 4,220 to 4,280. “After it forms, you get lower prices if the neckline breaks.” In that case, he said the broad-market index could fall to 3,900, he added.

Redler is also watching the charts of Big Tech stocks. “Apple has been an island where it’s not acting special, but it’s not breaking down. If Apple starts to break the 166-ish area, it would help to bring the S&P down faster,” he said. “Apple’s been trying to hold the $165 to $170 area, which keeps it somewhat constructive.”

Microsoft shares are also holding up. “Apple and Microsoft are such a high percentage of the S&P and the Dow. In order for the bears to really growl, they’re going to have to break those two down, in addition to the high growth names,” he said.

Flight to safety

In the bond market, investors have been weighing Federal Reserve rate hikes against worries about a Russian invasion of Ukraine. The 10-year Treasury yield was at 1.92% Friday. Yields move opposite price. Investors have been looking to the 10-year as a safe haven against possible weekend developments in Ukraine.

A week earlier, the market was anxious about the possibility the Fed would be more aggressive with interest rate hikes, starting with a possible 50-basis-point hike in March. But in the futures market, expectations for a half-point rate increase faded as the week wore on. The market was pricing in just about a quarter-point hike Friday.

St. Louis Fed President James Bullard had raised expectations for a bigger hike, and he reiterated that view Monday on CNBC’s “Squawk Box.” Then the minutes from the Fed’s last meeting were released Wednesday. They were less hawkish than expected, with no indication that the Federal Open Market Committee members favored a bigger rate hike.

“I think based on what we heard from the minutes and everyone except for Bullard, it doesn’t seem anyone really favors a 50-basis point hike,” said Ben Jeffery, rates strategist at BMO Capital Markets

As for economic data in the coming week, there are a few important reports including durable goods and consumer sentiment Friday.

Personal consumption expenditures data is also expected Friday. Investors will be focused on the inflation reading in that report, which is closely watched by the Federal Reserve.

“We kind of have a pretty good guide that that’s going to come in ahead of expectations. It’s probably the highlight of the week, as far as the data goes,” said John Briggs of NatWest Markets.

Boiling oil

The tense situation with Moscow has driven oil prices higher because of concerns that any retaliatory sanctions from the U.S. could limit Russian oil on the market. West Texas Intermediate futures rose above $95 per barrel in the past week for the first time in seven years. But by Friday, the priced retreated to about $91.

On Friday, the market reacted more to reports that the U.S. and Iran appeared close to a deal Friday to revive a nuclear agreement. If the deal is reinstated, Iran would be able to release its crude oil on to the global market.

“There’s a lot of positive commentary around it. There seems to be a conclusion in the market. It’s a marriage of convenience. The market needs the barrels. The Biden administration needs the barrels, and the Iranians need the money,” said John Kilduff, partner with Again Capital.

Kilduff said traders are watching the earnings reports from oil companies in the next week, with the most important being Occidental Petroleum. EOG Resources, NRG, Chesapeake Energy and Coterra Energy will also post results.

With U.S. drilling rig counts increasing, Kilduff said investors are watching to see if companies report plans to increase drilling.

“What are their capex plans going to be is a hot topic of conversation,” he said.

Week ahead calendar

Monday

President’s Day holiday

Markets closed

11:15 a.m. Fed Governor Michelle Bowman

Tuesday

Earnings: Home Depot, Macy’s, Toll Brothers, Caesars Entertainment, Public Storage, Agilent, Palo Alto Networks, Mosaic, Virgin Galactic, Texas Roadhouse, TrueCar, Anglogold Ashanti, KBR, Sealy, Cracker Barrel, Krispy Kreme, Fluor, Expeditors International, Medtronic, Norsk Hydro, HSBC

9:00 a.m. S&P/Case-Shiller home prices

9:00 a.m. FHFA home prices

9:45 a.m. Manufacturing PMI

9:45 a.m. Services PMI

10:00 a.m. Consumer confidence

3:30 p.m. Atlanta Fed President Raphael Bostic

Wednesday

Earnings: Booking Holdings, Barclays, eBay, Bausch Health, Brink’s, Travel + Leisure, Dana, Molson Coors Brewing, Sleep Number, IMAX, Tupperware, TJX Cos, Allbirds, Bath & Body Works, Petrobras, Lowe’s, Iamgold, Hertz Global, Extra Space Storage, Sturm Roger, Chesapeake, Coterra

Thursday

Earnings: Anheuser-Busch, Alibaba, Daimler, AXA, Moderna, WPP, Iron Mountain, Gannett, SeaWorld, Coinbase, Etsy, Morningstar, Dell Technologies, Beyond Meat, Ambac Financial, Cushman & Wakefield, Allscripts Healthcare, Keurig Dr. Pepper, NetEase, NRG Energy, Planet Fitness, VMWare, Southwestern Energy, Steve Madden, Wayfair, American Tower, Discovery, Occidental Petroleum

8:30 a.m. Initial jobless claims

8:30 a.m. Q4 Real GDP 2nd reading

10:00 a.m. New home sales

11:10 a.m. Atlanta Fed’s Bostic

12:00 p.m. Cleveland Fed President Loretta Mester

8:00 p.m. Fed Governor Christopher Waller

Friday

Earnings: Canadian Imperial Bank, Foot Locker, Sempra Energy, Liberty Broadband, Liberty Media, Cinemark

8:30 a.m. Durable goods

8:30 a.m. Personal income/spending

8:30 a.m. PCE deflator

10:00 a.m. Pending home sales

10:00 a.m. Consumer sentiment

Saturday

Earnings: Berkshire Hathaway