Wall Street crashes after oil hits $130 a barrel – Press Enterprise
By STAN CHOE
NEW YORK (AP) – Stocks tumble on Wall Street on Monday as another big rise in oil prices threatens to depress inflation’s hold on the global economy.
The S&P 500 fell 2.1% after a barrel of US oil rose to $130 overnight on amid the potential for the US to block imports from Russia. Stocks around the world fell even more early in the day, also tracking oil movements, although their losses eased as Crude slipped back to $120 a barrel.
The Dow Jones Industrial Average fell 573 points, or 1.7%, to 33,040 at 1:26 p.m. Eastern Time, and the Nasdaq Composite was 2.5% lower. Stocks are poised for their worst losses since Russia invaded Ukraine.
Gold and some jitters on Wall Street were also higher, although not quite as strong as when oil prices were peaking. Gold prices briefly touched $2,007.50 an ounce before trading at $1,991.90, up 1.3%.
Oil prices have skyrocketed lately on fears that Russia’s invasion of Ukraine could upend already tight supplies. Russia is one of the world’s largest energy producers, and oil prices were already high before the attack as the global economy demands more fuel following the coronavirus-induced shutdown.
US House Speaker Nancy Pelosi said in a letter to her colleagues on Sunday that “the House is currently considering tough legislation” to further isolate Russia over its attack on Ukraine. This could include an import ban on Russian oil and energy products, she said.
It’s an important step the US administration has yet to take despite a long list of measures to punish Russia, as the White House said it hoped to limit disruptions in oil markets. She wants to limit price jumps at the pump.
US officials may be considering easing sanctions on Venezuela, according to reports. This could potentially release more crude and allay concerns about reduced supplies from Russia.
A gallon of regular is already averaging $4,065 across the country after surpassing $4 for the first time since 2008 on Sunday. A month ago, a gallon averaged $3,441, according to AAA.
A barrel of US crude traded at $120.74 a barrel, up 4.1% after hitting $130.50 earlier. Brent crude, the international standard, rose 5.9% to $125.10 a barrel after surpassing $139 earlier.
Markets around the world have been reeling lately amid concerns about how high the price of oil, wheat and other commodities produced in the region will rise as a result of the Russian invasion and fueling the world’s already high inflation. In the United States, consumer prices last month rose at their fastest rate in four decades from a year earlier.
The conflict in Ukraine is also threatening food supplies in some regions, including Europe, Africa and Asia, which depend on the vast, fertile farmland of the Black Sea region, known as the “breadbasket of the world”.
The war is putting additional pressure on central banks around the world, with the Federal Reserve on track to hike interest rates later this month for the first time since 2018. Higher interest rates will slow down the economy, which will hopefully help curb high inflation. But if the Fed hikes rates too high, it risks pushing the economy into recession.
“Your reaction to geopolitics can’t really be measured, so there’s uncertainty on that,” said Sameer Samana, senior global market strategist at the Wells Fargo Investment Institute.
Some investors have viewed the war in Ukraine as a potential stimulus for the Fed to ease rate hikes. Investors love low interest rates because they tend to push up the prices of stocks and all types of markets.
But that may not be the case this time, economists at Goldman Sachs wrote in a report. With prices for oil, wheat and other commodities potentially rising further, there is a greater risk that persistently high inflation will impact the economy. That could turn the Fed’s traditional playbook on its head.
“After several decades in which economic, financial, or political shocks have invariably led to falling interest rates, markets may need to relearn that the opposite can also be true,” wrote Goldman Sachs economist Jan Hatzius.
Aside from the sanctions imposed by governments against Russia for its invasion of Ukraine, companies are also imposing their own fines. The list of companies leaving Russia has grown to include Mastercard, Visa and American Express, as well as Netflix.
Despite financial pressures, the value of the Russian ruble continued to slide, falling another nearly 20%. It fell below 0.7 cents.
“The Ukraine-Russia conflict will continue to dominate market sentiment and no sign of conflict resolution so far should limit risk sentiment in the new week,” said Yeap Jun Rong, market strategist at IG Singapore.
“It should be clear by now that economic sanctions will not deter Russian aggression, but rather serve as a punitive measure at the expense of the impact on global economic growth. Elevated oil prices may pose a threat to corporate margins and consumer spending prospects,” Yeap said.
On Wall Street, shares of Bed Bath & Beyond soared after billionaire Ryan Cohen’s investment firm took a nearly 10% stake in the company and recommended big changes. Cohen is a co-founder of Chewy, and he’s amassed something of a cult following after taking a stake in GameStop, the ailing video game chain that eventually named him CEO.
Bed Bath & Beyond shares rose 27.2% to $20.58.
Treasury yields rose, with the 10-year rising to 1.73% from 1.72% late Friday.
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AP Business Writers Damian J. Troise and Yuri Kageyama contributed.
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