U.S. stocks edged lower Thursday as investors assessed how a recent jump in commodities prices is likely to affect inflation and the Federal Reserve’s monetary policy.
The S&P 500 edged down 23.05 points, or 0.5%, to 4363.49 after advancing sharply Wednesday, and the Dow Jones Industrial Average fell 96.69 points, or 0.3%, to 33794.66. Both indexes have dropped in three of the past four trading sessions. The technology-focused Nasdaq Composite Index lost 214.07 points, or 1.6%, to 13537.94.
Moscow’s invasion of Ukraine has injected volatility into financial markets over the past week. Investors are trying to calculate how a shunning of Russian commodities will feed into already elevated inflation and how aggressively central banks will raise interest rates when faced with additional price pressures and an uncertain economic outlook.
“Beyond the current geopolitical events, the biggest headwind against the stock market is really the interest rates rising in the future,” said
Jimmy Lee,
chief executive of the Wealth Consulting Group.
U.S. crude prices briefly surged over $116 a barrel for the first time since 2008, before settling lower at $107.67.
The reversal came as representatives from the U.S., Britain, France, Germany, Russia, China and Iran engaged in meetings in Vienna in a bid to restore a 2015 deal that lifted most international sanctions on Iran in exchange for tight but temporary restrictions on its nuclear program. The U.S. left the pact in 2018 and Iran has since expanded its nuclear program.
If the deal were restored, Iranian oil exports would help make up for the Russian barrels that global buyers have shunned since it invaded Ukraine. Investors are worried that a prolonged elevation in oil prices could herald a combination of slowing growth and higher inflation—also known as stagflation.
Meanwhile, Federal Reserve Chair Jerome Powell’s testimony continued Thursday, this time before the Senate Banking Committee. He said Russia’s invasion of Ukraine was likely to push up inflation, a setback to central bank expectations that price pressures would diminish in the coming months.
“It’s going to be pretty rocky here for the next couple of weeks,” said
Leo Grohowski,
chief investment officer at BNY Mellon Wealth Management. “It’s almost unbelievable to think that 2021 was such a rewarding and low-volatility year and this year we’ve had anything but.”
Shares of energy companies that are likely to benefit from higher oil prices wobbled in conjunction with prices.
declined 63 cents, or 0.6%, to $97.41 and
fell 62 cents, or 1.3%, to $47.75, respectively.
Moscow’s invasion of Ukraine has injected volatility into broader markets.
Photo:
Allie Joseph/Associated Press
shares dropped $40.67, or 15%, to $224.02 after the company issued weaker-than-expected sales guidance, its biggest one-day percentage drop on record.
gained $9.30, or 9.2%, to $110.14, the largest one-day percentage increase since May 2020.
shares fell $14.72, or 8.1%, to $167.98 after the software business provided guidance that suggested aggressive investment would spur greater-than-expected near-term losses to the bottom line.
added $5.73, or 12%, to $55.10 after it reported that its sales and profit had grown.
In U.S. bond markets, the yield on the benchmark 10-year Treasury note ticked down to 1.843% from 1.862% Wednesday. Yields and prices move inversely.
“We expect rates to be volatile because you’ve got two powerful forces pulling in opposite directions right now,” said David Grecsek, managing director at Aspiriant. While investors rush to bonds during times of turmoil, real rates remaining negative could deter interest, Mr. Grecsek said.
The pan-continental Stoxx Europe 600 fell 2%. Russian stock markets remained closed for the fourth consecutive day as the government seeks to limit a fire sale, having also imposed capital controls on the ruble.
The
has suspended trading in more than 50 Russian stocks. Index providers
and FTSE Russell have said they would cut Russian equities from their benchmarks next week and S&P Dow Jones Indices is considering doing the same.
The ruble dropped Thursday against the greenback, according to
Traders say investors’ and brokers’ unwillingness to touch the currency has limited the ease with which they can trade it. Currencies of nearby countries have fallen against the dollar as well, as investors worry about economic spillover.
Major stock indexes in Asia largely gained. South Korea’s Kospi jumped 1.6%, and Japan’s Nikkei 225 rose 0.7%. China’s Shanghai Composite fell 0.1%.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Hardika Singh at hardika.singh@wsj.com
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