By Chuck Mikolajczak

NEW YORK, (Reuters) – The’s 1% slump Tuesday proved that the most closely watched stock index in the world was experiencing a correction after the 2020 Wall Street plunge caused by the COVID-19 pandemic.

Investors from the United States sold stock stocks in fear of war with Russia and Ukraine. Some losses were also reduced after President Joe Biden declared a new wave of sanctions on Russia.

These geopolitical worries have increased concerns about U.S. Federal Reserve interest rate hikes. The central bank is trying to control inflation at its 40-year-highs.

NATO Secretary-General Jens Stoltenberg earlier stated that Russia had plans to launch a major assault against Ukraine, despite Moscow having recognized the existence of two separate regions within the ex Soviet republic’s eastern.

The S&P 500 is now down 10.25% from its record closing high of 4,796.56 set on Jan. 3, confirming a correction, based on a widely used definition of a decline of 10% or more. In recent trading sessions the index was down by more than 10% from its intraday high, but it did not close below that level.

GRAPHIC: S&P 500 Corrections and Bear Markets – https://fingfx.thomsonreuters.com/gfx/mkt/lbpgnwgmrvq/Pasted%20image%201643397044082.png

Last month, the small-cap index confirmed that it is in a bearish market. This means that its value has dropped 20% since its highest point. Some analysts believe smaller stocks could be on the verge of bottom.

In January, Nasdaq also confirmed it was in its fourth correction after the outbreak of pandemic. This is almost 17% less than its November record close.

GRAPHIC: Index corrections – https://fingfx.thomsonreuters.com/gfx/mkt/xmvjoegqnpr/Pasted%20image%201645567996374.png

Shares of companies with high growth tend to be disproportionately weighed down by rising interest rates. Investors value these shares based on future earnings. High interest rates can also devalue the value future earnings, which is more important than earnings in the immediate future.