Wall Street returns to rally mode even as oil prices rise again – Press Enterprise
By STAN CHOE and ALEX VEIGA
NEW YORK (AP) – Wall Street made another strong bounce on Wednesday, this time back into rally mode, as stock and Treasury yields rose even as U.S. crude prices climbed to their highest levels in more than a decade .
The S&P 500 rose 1.9%, erasing losses from earlier in the week after Federal Reserve Chair Jerome Powell said he supported a more modest rise in interest rates this month than some investors feared. He also said he still expects inflation, which is at its highest level in 40 years, to moderate over the course of the year.
“Although some Fed governors have been saying, ‘Oh my god, this is such a massive crisis,’ as of late, conventional wisdom is slowly and steadily winning the race right now,” said JJ Kinahan, chief strategist at TD Ameritrade.
The comments helped propel the market higher, contributing to modest gains from earlier in the morning. Other parts of the market also gained ground a day after concerns over Russia’s invasion of Ukraine caused the S&P 500 to fall 1.5% and prices for all types of commodities to surge.
Treasury yields surged to erase some of their heavy losses over the past week. Gold declined and a degree of nervousness among Wall Street equity investors eased after swinging sharply over the past few days.
“We’ve seen wild swings but not big changes in the indices,” said Jeff Kleintop, Charles Schwab’s chief global investment strategist. “Geopolitical conflicts can be very unsettling, but you don’t usually get bear markets, just bouts of volatility.”
Markets spun wildly as investors, at times blindly, tried to gauge how high Russia’s attack on Ukraine will drive prices for oil, wheat and other commodities, where the region is a major producer. Added to this are concerns about what upcoming rate hikes by the Federal Reserve and other central banks around the world will mean for the economy and for inflation.
Powell told Congress that the Fed would raise interest rates for the first time since 2018. However, he also said the attack on Ukraine may have clouded conditions and its impact on the US economy is “highly uncertain”, adding that “we are never on autopilot”.
The Fed is walking a tightrope, raising interest rates enough to curb the highest inflation in generations, but not enough to push the economy into recession. At the same time, higher interest rates tend to put downward pressure on stocks and most other assets.
The yield on the 10-year Treasury rose to 1.89% from 1.72% late Tuesday, while the two-year Treasury rose to 1.53% from 1.31%. However, yields remain well below pre-Russian invasion levels. The 10-year yield was above 2% last month before falling as investors moved to what were perceived as safer assets amid war worries.
US oil prices rose another 7% to $110.60 a barrel, their highest in just over a decade. Brent crude, the international standard, rose 7.6% to $112.93 a barrel.
The leaders of OPEC and other major oil-producing countries decided on Wednesday to stick to their plan to gradually increase oil production. The OPEC+ oil producers’ coalition, consisting of OPEC members led by Saudi Arabia and non-cartel members led by Russia, decided to increase oil production by 400,000 barrels per day in April.
The move follows a perhaps less impactful decision by the United States and other key governments at the International Energy Agency to release 60 million barrels from strategic reserves to boost supply.
“Markets rejected the notion that 60 million barrels of released strategic reserves would be a consequence of risks of an endangered Russian supply,” Mizuho Bank’s Tan Boon Heng said in a report. “Russia is pumping more than that in just six days.”
In the stock markets, all the uncertainty about oil prices and inflation has led to large fluctuations not only on a daily basis, but also on an hourly basis. The S&P 500 oscillated between gains of 0.4% and 2.2% on Wednesday. It closed 80.28 points higher at 4,386.54.
The Dow Jones Industrial Average was up 596.40 points, or 1.8%, to 33,891.35, while the Nasdaq Composite was up 219.56 points, or 1.6%, to 13,752.02.
More than 90% of stocks in the S&P 500 rose, with technology, financial and healthcare companies taking a big part in the rally. Bank stocks led the gainers, rising 2.6% as higher longer-term interest rates can mean bigger gains for those who lend. Energy stocks also helped raise the index as they benefited from higher energy prices.
Ross Stores rose 6.1% after the retail chain reported stronger than analyst-expected earnings for its most recent quarter.
Ford rose 8.4% after accelerating its transformation into an electric vehicle company and splitting its EV and internal combustion engine operations into separate companies.
Stock markets around the world were mixed. France’s CAC 40 rose 1.6%, Germany’s DAX returned 0.7% and Japan’s Nikkei 225 fell 1.7%.
The Central Bank of Russia said share trading on the Moscow Stock Exchange would remain closed for a third day on Wednesday, although trading in currencies and precious metals resumed for the first time this week.
Late Tuesday, President Joe Biden announced he would join US allies in closing the country’s airspace to Russian planes, the latest in a series of sanctions and other measures aimed at isolating Russia.
But Biden also said in his annual State of the Union address that he would try to cushion Americans against the impact of higher oil prices. “I will use every tool at our disposal to protect American businesses and consumers,” Biden said.
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AP business writers Joe McDonald and Damian J. Troise contributed. Veiga reported from Los Angeles.
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