NEW YORK — (AP) — Markets shook on Monday amid concerns about rising oil prices and the severity of the impact on the global economy after the United States and its allies hiked the price petrol. financial pressure on Russia for his invasion of ukraine.
Stocks swung up and down several times, leaving major indexes mixed. Investors piled into bonds in search of safety, pushing yields sharply lower, and the value of the Russian ruble plunged to a record low.
The S&P 500, which had lost up to 1.6%, recouped much of its losses to end down 0.2%. The Dow Jones Industrial Average fell 0.5% and the Nasdaq composite rose 0.4% after recovering from a 1.1% decline.
The volatile exchanges followed the decision by Western allies over the weekend to block some Russian banks from a key global payment system. The US Treasury Department also announced new and powerful sanctions against the Russian central bank.
The Biden administration has said Germany, France, the United Kingdom, Italy, Japan, the European Union and others will join the United States in hitting the Russian central bank, which said that the Moscow Stock Exchange would remain closed on Monday.
Stocks on Wall Street pared losses throughout the morning, at one point returning to modest gains, after big tech stocks and others that benefit most from low interest rates rallied. The war in Ukraine is raising expectations that the Federal Reserve may need to slow down its campaign to raise interest rates in order to fight inflation.
Other markets showed more fear of growing antagonism between Russia and the United States and its allies.
Oil prices on both sides of the Atlantic soared more than 3% amid concerns over what will happen to crude supplies as Russia is one of the world’s largest energy producers . This increases pressure on the already high inflation that is squeezing households around the world.
Seeking safer yields, investors invested in US government bonds, causing the 10-year Treasury yield to fall about 0.15 percentage points to 1.83%, its highest. down since the omicron coronavirus variant first rattled investors. Gold rose 0.7%.
The swings are just the latest wild swings in markets, which eased last Friday partly on the belief that the sanctions on Russia weren’t as severe as they could have been. Sharper turns are likely in the hours and days ahead given all the uncertainty surrounding the war.
“Things are fluid right now and investors are looking for the next shoe to drop,” said Barry Bannister, chief equity strategist at Stifel.
The pressure on Russia does not only come from governments. London-based energy giant BP said on Sunday it would divest its investment in Rosneft, a Russian energy company. BP has held a nearly 20% stake in Rosneft since 2013, and its London-listed shares fell 3.9%.
The S&P 500 fell 10.71 points to 4,373.94. The Dow, which was down 589 points, finished down 166.15 points at 33,892.60. The Nasdaq gained 56.77 points to 13,751.40.
The Russell 2000 Index of small company stocks also rebounded from an early plunge, adding 7.16 points, or 0.4%, to 2,048.09.
Markets were already on edge before the Russian invasion, worried about upcoming interest rate hikes by the Federal Reserve, which would be the first since 2018.
Fed Chairman Jerome Powell is due to testify before Congress later this week, where he could offer clues about the path of interest rates. A report on Friday will also show whether the strength in the US job market continued in February, which would give the Fed more leeway to raise rates.
“This situation throws the issue of inflation into a tailspin a bit,” said Greg Bassuk, CEO of AXS Investments. “Eyes are going to be on Powell to see how the Fed thinks these geopolitical events might impact their timing and extend their rate hikes.
The Fed is caught on a tight rope, having to raise rates enough to eradicate high inflation, but not enough to suffocate the economy into a recession. Higher rates also put downward pressure on all kinds of investments, from stocks to cryptocurrencies.
Given the uncertainty surrounding Ukraine, investors have sharply reduced bets that the Fed will raise rates in March by double the usual increase. Traders now only expect a 10.4% chance of that, according to CME Group. A day earlier, they assessed a probability of 24%.
“Central banks are expected to take a somewhat slower and more cautious approach following this crisis, which provides a positive offset for risky assets,” said Jonas Golterman, senior global markets economist. at Capital Economics, in an online statement. Monday briefing.
S&P 500 energy stocks jumped 2.6%. Defense-related businesses also advanced, with Lockheed Martin up 6.7%.
Financial analysts say wars and other scary geopolitical events tend to have only a temporary effect on markets, lasting for weeks or months. But at the moment, the fear is nevertheless even higher.
Putin’s order that Russian nuclear weapons stand at increased preparation for launch heightened tensions with Europe and the United States and reignited latent Cold War-era fears.
Russia’s central bank raised its benchmark rate from 9.5% to 20% in a desperate attempt to prop up the ruble’s slide and stave off a run on the banks. The Russian currency at one point dipped below 0.9 cents before rising to a shadow above one cent, albeit down almost 15%.
The ruble plunged more than 30% after the decision to block Russian banks from the SWIFT payment system. Among other things, the sanctions aim to restrict the Russian central bank’s access to more than $600 billion in reserves and hamper its ability to support the rouble.
AP Business Writers Damian J. Troise, Kelvin Chan, and Yuri Kageyama contributed. Veiga reported from Los Angeles.
Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.