Stock futures fall slightly as investors weigh Russia-Ukraine tensions, Fed's next move

Stock futures were lower on Monday as investors monitored the tensions between Ukraine and Russia and potential Federal Reserve interest rate hikes.

Futures tied to the Dow Jones Industrial Average fell 70 points. S&P 500 futures fell 0.3% and Nasdaq 100 futures dipped 0.4%.

Futures cut their losses after comments from Russia's Foreign Minister Sergey Lavrov to Vladimir Putin in Moscow that suggested Russia would continue diplomatic talks with the West over Ukraine, lowering tensions a bit following a market sell-off Friday.

The VanEck Russia ETF rose more than 3% in premarket trading on Monday after losing more than 7.5% on Friday.

Investors are grappling with a potential war between Russia and Ukraine. A phone call over the weekend between U.S. President Joe Biden and Russian President Vladimir Putin, in which Biden attempted to dissuade Putin from attacking Ukraine, failed to achieve a breakthrough. 

Some airlines have also halted or redirected flights to Ukraine amid the brewing crisis, while the Pentagon ordered the departure of U.S. troops in Ukraine.

"The real fear is that China backs Russia and the relationship between China and the U.S. continues to deteriorate," said Robert Cantwell, chief investment officer at Upholdings. "How it changes the U.S. relationships with the other economic superpowers – that's what's really scary and would affect economic outcome."

Investors are also weighing the potential impact of surging inflation on the U.S. economy, as well as the potential measures the Federal Reserve could take to quell the jump in prices.

St. Louis Federal Reserve President James Bullard reaffirmed his case for a rapid mover higher in interest rates to address rampant inflation. The Labor Department reported Thursday that inflation in January surged 7.5%, its biggest 12-month gain since 1982.

"I do think we need to front-load more of our planned removal of accommodation than we would have previously. We've been surprised to the upside on inflation. This is a lot of inflation," Bullard told CNBC's Steve Liesman during a live "Squawk Box" interview.

"Our credibility is on the line here and we do have to react to the data," he added. "However, I do think we can do it in a way that's organized and not disruptive to markets."

On Friday, the major averages declined as the White House warned that a war in Ukraine could begin "any day now" and urged Americans there to leave "immediately." Oil prices jumped Friday, along with traditional safe havens like Treasurys.

Rate-sensitive tech stocks were hit hard by the report, which briefly sent the 10-year Treasury yield above 2% — the first time since 2019 that the 10-year traded above that level.

Last week, the Dow and S&P 500 fell 1% and 1.8%, respectively, for the week. The tech-heavy Nasdaq Composite slid more than 2%.

The tension over Ukraine also continued to hit the energy markets, with natural gas futures up nearly 5% early Monday while oil prices also edged higher.

"This past week, the primary story was all about inflation," Cantwell said. "Every single time the inflation number comes out, it keeps surpassing expectations and the while the Fed has signaled that it's going to raise rates, they haven't actually raised them. The longer they wait, the faster they're going to have to raise them."

Economists at Goldman Sachs also raised their Fed forecast to seven hikes for 2022, and said it sees the 10-year hitting 2.25% this year.

The firm also lowered its 2022 S&P 500 price target to 4,900 from 5,100. That would represent just a 2.8% return from where the benchmark ended 2021. Goldman said that higher rates will crimp valuations.

Earnings are expected to ramp up again this week, with Nvidia, Walmart, Shopify, AMC and more scheduled to report.