Stocks surge, oil tumbles in latest dizzying market swing

Stocks rallied and oil prices fell sharply on Wednesday as the big swings rocking global markets go both ways amid uncertainty over the war in 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 losing streak, and the tech-heavy Nasdaq composite added 3.6%. These large swings have rattled markets in recent weeks as investors try to assess the economic damage that Russia’s invasion of Ukraine will cause. This volatility hit not only day-to-day, but also hour-to-hour, with some days seeing several large reversals.

The chaotic movements should only continue with such high uncertainty about the war in Ukraine and its ultimate economic fallout. The region is key to markets as it is a major producer of oil, wheat and other commodities, the prices of which have soared on concerns about supply disruptions.

Stocks again moved in the opposite direction of oil prices, with inflation a major concern. Analysts said bargain hunters could claw back stocks after worries about a slowing economy coupled with high inflation triggered their recent steep decline.

“Glimmer of hope”

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

“Stock markets have a bid today as markets cling to any glimmer of hope for a possible step towards de-escalation when Ukrainian and Russian finance ministers meet in Turkey tomorrow,” Anu said. Gaggar, global investment strategist for Commonwealth Financial Network, said in an email. “Markets could also pause in a downtrend and see some consolidation due to oversold conditions.”

Crude oil prices fell and the fall accelerated amid reports that the United Arab Emirates will urge other OPEC members to increase production and ease supply problems. A barrel of US crude oil fell 12.1% to settle at $108.70. Brent, the international standard, fell 13.2% to settle at $111.14.

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


Why are gas prices so high?

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“Markets were priced like the Strait of Hormuz was blocked, and that just wasn’t reasonable,” Jamie Cox, managing partner of Harris Financial Group, said in an email about the market rally. “And it’s not like the Middle East has suddenly gone offline. Markets often overreact ‘hair on fire’ to global events, which unlocks tremendous value for those who pay attention to price upheavals. .”

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

The movements of retail investors may be the result of people worrying about missing out on any potential rebound. A buy-the-dip strategy, where stock declines were seen primarily as opportunities to buy low, was very successful after the 2020 crash caused by the coronavirus. The S&P 500 has continued to climb since that 10% flat drop until recently.

Recent big market moves also show that prices are already reflecting a lot of pessimism, with crude oil prices up more than 50% so far in 2022. Perhaps this is why crude prices have actually retreated on Tuesday, after President Joe Biden announced a US ban on imports Russian oil.

A ban will lead to supply disruptions, but oil traders may have already taken that into account when they briefly pushed the price of U.S. crude above $130 a day ahead of the announcement.

Gold prices and some nervousness among stock investors on Wall Street also eased.


President Biden bans all Russian oil, gas and energy imports

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European nations face an even greater shock than the United States from rising energy prices due to Russia’s invasion of Ukraine. This could lead the European Union to take greater measures to support its economy. The result could be more stimulus and more caution from central banks on interest rate hikes, said Stephen Dover, chief market strategist and director of the Franklin Templeton Investment Institute.

“While the United States will have the wind in its face as the stimulus falls, Europe may actually have the wind in its sails.”

On Wall Street, the gains were broad-based, with nearly 90% of S&P 500 stocks up, led by technology companies. Some of the strongest moves came from airlines, travel agencies and other stocks which rebounded from steep declines on worries about fuel costs and the economy.

Fed on rate hike target

Treasury yields rose on the eve of an anticipated interest rate hike by the Federal Reserve. The Fed’s policymaking committee is meeting next week, and it’s widely expected to vote to raise its benchmark short-term 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 it prepares to raise rates through 2022, which tends to slow the economy. The central bank wants to drive rates high enough to bring down inflation, which is at its highest level in generations. But he does not want to increase them to the point of causing a recession.

“There’s more uncertainty about what the Fed is going to do now than there was a few weeks ago,” Dover said.

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

Bitcoin’s value rose more than 9% and climbed back above $42,000 after Biden signed an executive order on government oversight of the cryptocurrency. Crypto players are increasingly saying they welcome increased regulation and want to help shape it.