The stock market’s losses accelerated on Wednesday afternoon, with the Dow falling nearly 400 points.
Mounting sanctions on Russia and military efforts by the Allies have not helped much.
The Dow Jones Industrial Average was down 396 points, or 1.1%, in afternoon trading. Other indices did not look much better. The S&P 500 dropped 1% and the Nasdaq Composite fell 0.8%.
Investors are trying to shape a number of risks, including Russia’s war in Ukraine. On Wednesday, the Secretary General of NATO said that more troops would be sent to the eastern side of the coalition in response to Russia’s ongoing aggression. And on Tuesday, the White House said it was preparing to impose sanctions on members of Russia’s lower house of parliament. President Joe Biden and NATO allies are expected to announce additional sanctions on Russia when they meet in Brussels this week.
“There isn’t enough money to come with confidence at this level of geopolitical risk,” said Edward Moya, senior market analyst at Oanda. “You’re probably looking at a market here that has become overly optimistic.”
Indeed, the market has tumbled after a rally in stocks on Tuesday, with major indices making impressive gains from their recent lows. The S&P 500, at its open on Wednesday, was up more than 8% from its year low on March 8. The buying comes even as the Federal Reserve has made it clear that it will raise interest rates several times over the next few years to fight inflation. Just before the Fed set its projected rate-hike path last week, the 2-year Treasury yield has sent up 1.87% to 2.13%. Higher rates could drag economic growth down, perhaps into a recession.
“The big question now is whether all this tightening of the Fed will push the economy into recession or whether policymakers can achieve the much-anticipated ‘soft landing’,” writes Deutsche Bank strategist Jim Reid.
Another big question, and one of the most pressing fears, is further sanctions on Russian goods, which would restrict global supply and drive up prices, creating an even more burdensome inflation for consumers. The Bloomberg Commodity Index is up 30% for the year, though it is down from its March 8 peak, making the stock a welcome site for investors.
West Texas Intermediate crude, down 2% from its multi-year peak in early March, was up 2% at $114 a barrel.
“You cannot ignore the fall in oil prices,” Moya said. “It looks like we are heading towards an eventual EU threat of sanctions on Russian energy at some point.”
And as if broader stock market momentum wasn’t telling enough, airline stocks were indicating that higher oil prices were a cause for concern. Fuel is a large part of operating costs for airlines, so higher oil prices put pressure on profit margins for those companies. The US Global Jets Exchange Traded Fund (JETS) dropped 1.5%.
Here are some stocks trending Wednesday:
GameStop (GME) was up 11% on Wednesday after chairman Ryan Cohen bought 100,000 more shares in Meme stock, bringing his holding to 11.9%.
Adobe (ADBE) was down 9% after the software company reported better-than-expected earnings, but provided an outlook for the current quarter that fell short of Wall Street’s estimates.
Tesla (TSLA) rose 0.7%. The stock jumped 7.9% on Tuesday after the electric-vehicle giant opened its first European car factory in Germany.
T-Mobile US (TMUS) stock fell 0.2% even after it was upgraded from sector weight to overweight at KeyBanc Capital Markets.
BP Plc (BP) stock rose 3.2% after it was upgraded from similar-weight to overweight at Morgan Stanley.
Write to Joe Woelfel at [email protected]