By Devik Jain and Noel Randewich

(Reuters) – The S&P 500 ended lower in volatile trading on Monday, with investors wrestling with uncertainty and bank stocks dropping following powerful Western sanctions against Russia as it continued its invasion of Ukraine.

Citigroup fell and weighed on the S&P 500 banks index as the U.S. 10-year Treasury yield slipped. The broader S&P 500 financial index also dropped.

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.

Russian artillery bombarded residential districts of Ukraine’s second-largest city, as Moscow’s invading forces met stiff resistance on a fifth day of conflict.

“The Russia-Ukraine invasion in itself is not likely going to be a long-term headwind for U.S. equities. But I think in the short term, it’s a massive contributor to the equity pullback,” said Sylvia Jablonski, chief investment officer at Defiance ETFs.

The S&P 500 energy sector rallied thanks to higher oil prices. [O/R]

Defense stocks Raytheon Technologies, Lockheed Martin Corp, General Dynamics Corp, Northrop Grumman and L3Harris Technologies gained following news that Germany would increase its military spending.

Cybersecurity stocks also rallied, with Palo Alto Networks, Fortinet, Zscaler and CrowdStrike Holdings all climbing.

According to preliminary data, the S&P 500 lost 10.90 points, or 0.25%, to end at 4,373.68 points, while the Nasdaq Composite gained 60.55 points, or 0.44%, to 13,755.17. The Dow Jones Industrial Average fell 171.82 points, or 0.50%, to 33,886.93.

Tesla jumped after the environmental ministry in the German state of Brandenburg said it is in the final phase of the approval process for Tesla’s planned factory there.

The worsening geopolitical crisis has added to investors’ concerns about soaring inflation and the Federal Reserve’s rate-hike plans. The S&P 500 and the Nasdaq logged their biggest two-month declines since the pandemic-led crash in March 2020.

The CBOE volatility index, also known as Wall Street’s fear gauge, rose for a second straight session.

Delta Air Lines Inc dropped after Russia closed its airspace to airlines from 36 countries in response to Ukraine-related sanctions targeting its aviation sector.

First Horizon Corp surged after TD Bank Group offered to acquire the U.S. bank in an all-cash deal valued at $13.4 billion.

(Reporting by Devik Jain, Uday Sampath Kumar and Medha Singh in Bengaluru, and by Noel Randewich in Oakland, Calif.; Editing by Anil D’Silva, Aditya Soni and Cynthia Osterman)