Dow drops 400 points as supply disruptions push oil prices higher

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The stock market fell on Wednesday as oil prices rose again due to supply disruptions caused by the Russian invasion of Ukraine, and investors face renewed inflation fears even after the Federal Reserve has pledged to raise interest rates more aggressively in an effort to combat soaring prices.

Highlights

Stocks fell as oil prices soared: The Dow Jones Industrial Average fell 1.3%, around 450 points, while the S&P 500 lost 1.2% and the strong Nasdaq Composite technological component of 1.3%.

Investors continue to assess the ongoing war between major oil exporters Russia and Ukraine as the Biden administration plots another round of punishments and NATO is sending more troops to its eastern flank.

Markets have been hit by soaring commodity prices that have resulted from the dispute, with experts warning that rising prices will hit consumers and exacerbate inflation, especially if the European Union decides to follow the United States in banning imports of Russian oil.

Oil prices surged again in volatile trading on Wednesday amid growing concerns over supply disruptions caused by Russia’s invasion of Ukraine, as “the decline in Russian crude exports finally appears to be underway.” “, according to Matt Smith, senior oil analyst for the Americas at Kpler.

The price of US benchmark West Texas Intermediate jumped 5% and now stands at $115 a barrel, while international benchmark Brent crude is trading at around $121 a barrel.

Yields on government bonds, meanwhile, continued to climb this week after the Federal Reserve pledged to be more aggressive in its fight against inflation: the 10-year US Treasury note rose above 2 .41%, its highest level since May 2019, on Wednesday.

Surprising fact:

Meme GameStop and AMC Entertainment shares soared on Wednesday, rising 12% and 15% respectively. Retail investors have piled into both stocks this week, with the latest boost coming from news that billionaire Ryan Cohen, co-founder of pet supplies company Chewy, has invested another $10 million in GameStop.

Crucial quote:

Markets are lower as “the harsh reality sets in that the Fed is unlikely to be able to navigate a soft landing as geopolitical risks continue to maintain upward pressure on prices,” says Edward Moya, senior market analyst at Oanda. “The Fed will either have to tighten policy to the point of sending the economy into a recession, or it will have to turn around again and prevent policy from becoming too restrictive.” Stocks will also continue to struggle as geopolitical risks drive energy prices higher, Moya predicts.

To monitor :

“The big question now is whether all this eventual Fed tightening will push the economy into recession or whether policymakers can pull off the much sought-after ‘soft landing’ that avoids one,” said strategist Jim Reid. from Deutsche Bank, in a recent note.

Further reading:

Analysts say these stocks may rally 30% or more as investors weather a “perfect storm of headwinds” (Forbes)

Stocks jump as investors brace for bigger Fed rate hikes to fight inflation (Forbes)

History shows that investors who buy during bear markets are likely to see huge gains (Forbes)

The long-awaited Federal Reserve rate hike is here: Powell announces a 0.25% hike (Forbes)

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