Stock markets fell on Wednesday as oil prices rose again due to supply disruptions from Russia’s invasion of Ukraine, and after the Federal Reserve promised to raise interest rates more aggressively to fight rising prices. Even after that, investors were faced with renewed inflationary fears.
Stocks fell as oil prices rose: The Dow Jones Industrial Average fell 1.3%, up nearly 450 points, while the S&P 500 and the tech-heavy Nasdaq Composite fell 1.3%.
Investors continue to assess the ongoing war between Russia and Ukraine’s major oil exporters, as the Biden administration prepares for a new round of sanctions and NATO sends more troops to its eastern flank.
The market has taken a hit from rising commodity prices that have resulted in the conflict, with experts warning that higher prices will hit consumers and drive up inflation – especially if the EU fails to impose sanctions on Russian oil imports. The United States decides to follow.
Oil prices rose on Wednesday amid rising concerns over supply disruptions from Russia’s invasion of Ukraine, as “the decline in Russian crude exports is finally visible”, according to Matt Smith, US chief oil analyst at Kepler. Again there was a boom in volatile business.
US benchmark West Texas Intermediate price jumped 5% and is now at $115 a barrel, while international benchmark Brent crude trades at around $121 a barrel.
Meanwhile, government bond yields have continued to rise higher this week after the Federal Reserve vowed to be more aggressive in its fight against inflation: the 10-year US Treasury note crossed 2.41% – as of May 2019 Its highest level since – on Wednesday.
Shares of the meme GameStop and AMC Entertainment skyrocketed on Wednesday, rising 12% and 15%, respectively. Retail investors have piled into both stocks this week, with the latest boost from news that billionaire Ryan Cohen, cofounder of pet supply company Chevy, invested another $10 million in Gamestop.
“Markets are down as the harsh reality sets in as the Fed most likely will not be able to navigate a soft landing as geopolitical risks will keep upward pressure on prices,” says Edward Moya, senior market analyst at Oanda. “The Fed will either have to tighten policy enough to send the economy into recession, or it will have to flop once again and prevent policy from becoming too restrictive.” Stocks will also continue to struggle as geopolitical risks send energy prices even higher, Moya predicts.
What to look for:
“The big question now is whether this all-too-potent Fed tightening will push the economy into recession or whether policymakers can achieve the much-anticipated ‘soft landing’,” Deutsche Bank strategist Jim Reid said in a recent note.
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