Stocks jump, oil drops in latest dizzying swing for markets

Shares rebounded and oil prices plummeted on Wednesday as major changes shaking world markets went in both directions amid uncertainty over the war. Ukraine.

The Dow Jones Industrial Average gained 654 points, or 2%, to close at 33,286. The S&P 500 rose 3.6%, ending a four-day streak of losses, and the high-tech Nasdaq compound added 3.6%. Such big changes have been shaking markets in recent weeks as investors try to assess the economic damage that the invasion of Ukraine by Russia will do. This volatility has affected not only the day to day, but also the hour to hour, and some days have seen several large investments.

It is likely that chaotic movements will only continue with such high uncertainty about the war in Ukraine and its recent economic consequences. The region is key to markets because it is a major producer of oil, wheat and other commodities, whose prices have risen due to concerns over supply disruptions.

Shares once again moved in the opposite direction to oil prices, with such a dominant concern about inflation. Analysts said bid hunters may be taking action after worries about a slowdown in the economy coupled with high inflation triggered its recent sharp drop.

“Light of Hope”

Many of these buyers appear to be smaller pocket “retail” investors who trade with their phones and laptops. And they often buy stocks that sell big professional investors. Investors are also being encouraged by a meeting scheduled for Thursday in Turkey between Russian Foreign Minister Sergei Lavrov and his Ukrainian counterpart Dmytro Kuleba.

“Equity markets have an offer today, as markets cling to the slightest hope of a possible step towards escalation when the finance ministers of Ukraine and Russia meet tomorrow in Turkey,” Anu said. Gaggar, global investment strategist at Commonwealth Financial Network. he said in an email. “Markets may also be taking a break from a downward trend and seeing some consolidation due to overselling conditions.”

Crude oil prices fell and the fall accelerated amid reports that the UAE will urge OPEC members to increase production and alleviate supply concerns. US crude oil fell 12.1% to $ 108.70. Brent crude, the international standard, fell 13.2% to $ 111.14.

The fall could give U.S. motorists a brief respite after gasoline prices hit another record high on Wednesday. The national average now is $ 4.25 per gallonthe highest after Tuesday’s previous record of $ 4.17 per gallon.

“Markets were priced as if the Hormuz Strait was blocked, and that was unreasonable,” Jamie Cox, managing partner of Harris Financial Group, said in an email about the market rebound. “And it’s not like the Middle East is suddenly offline. Markets often have excessive ‘flaming hair’ reactions to world events, which unlocks huge value for those who pay attention to the dislocations of the Middle East. prices”.

Last week saw a record sale of US stocks by hedge funds, strategist Jill Carey Hall wrote in a recent report from BofA Global Research. Retail investors and institutional investors were net buyers.

Retail investor movements can be the result of people’s concern about missing out on any possible bounce. A “buy down” strategy, where stock falls were seen primarily as opportunities to buy down, was very successful after the 2020 crash caused by the coronavirus. The S&P 500 continued to rise from this 10% drop until recently.

Recent major market movements also show that prices are already very pessimistic, with crude oil prices rising by more than 50% so far in 2022. Perhaps that is why crude oil prices actually fell on Tuesday, after the president Joe Biden announced a ban on imports into the United States of Russian oil.

A ban will disrupt supply, but oil traders may have already taken this into account when they briefly pushed the price of US crude above $ 130 a day before the announcement.

Gold prices and a measure of nervousness among Wall Street stock investors also eased.

European nations are facing an even bigger shock than the US over rising energy prices due to Russia’s invasion of Ukraine. This could lead the European Union to take further steps to strengthen its economy. The result could be more stimulus and more caution on the part of central banks with rising interest rates, said Stephen Dover, chief market strategist and head of the Franklin Templeton Investment Institute.

“While the US will have the wind in its face as the stimulus falls, Europe may have the wind in its back.”

On Wall Street, earnings were wide, with nearly 90% of the S&P 500 shares on the rise, led by tech companies. Some of the strongest movements came from airlines, travel companies and other stocks that recovered from the sharp falls in concerns about fuel costs and the economy.

Powered with the aim of raising rates

Treasury yields rose as an anticipated rise in interest rates on the part of the Federal Reserve approached. The Fed’s policy-making committee will meet next week and the broad expectation is that it will vote to raise its short-term benchmark rate by a quarter of a percentage point. It would be the first such increase since 2018.

The Fed faces a delicate and increasingly difficult task as rates rise until 2022, which tends to slow the economy. The central bank wants to raise rates high enough to bring down inflation, which is at its highest level in generations. But he doesn’t want to raise them so much that it will cause a recession.

“There’s more uncertainty about what the Fed will do now than it was just a few weeks ago,” Dover said.

The 10-year Treasury yield rose to 1.94% from 1.86% on Tuesday afternoon.

The value of bitcoin rose more than 9% to more than $ 42,000 after Biden signed an executive order on government oversight of the cryptocurrency. Cryptography players are increasingly saying that they welcome the increase in regulation and want to help.