May 24, 2022

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Stocks rise, oil slips as investors watch Ukraine negotiations

Stocks rise, oil slips as investors watch Ukraine negotiations

Stocks rose and oil prices fell on Monday, easing concerns that higher commodity prices could derail the US economy as investors await a possible interest rate hike by the Federal Reserve later this week.

Around midday in New York, the Dow Jones Industrial Average was up more than 1%, and the S&P 500 was up 0.5%. benchmark stock index Down for four of the past five weeks. Investors were spooked by the war in Ukraine and the rising commodity prices sparked by the conflict, as well as the prospect of higher interest rates. They paid to Perceived havens are like goldduring the sale of shares.

Investors said positive comments from both Ukrainian and Russian officials about round of negotiations Markets strengthened Monday. The technology-focused Nasdaq Composite was down 0.1%.

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It fell 1.1% with the outbreak of Covid-19 in China Manufacturing disruption by a major supplier in Shenzhen City.

While lower oil prices could ease fears of slowing consumer spending amid a record hike in gasoline prices, one possible reason for the drop in oil – the Covid-19 outbreak in China – could renew concerns about a potential supply chain and the resulting impact on the global economy. American economy. Shortages in everything from computer chips to chocolate stymied growth for months as the Omicron variant scrambled business plans and raised costs for companies large and small. small business.

“The China shutdown and potential supply chain issues, people are scared of that,” said Joe Saluzzi, co-head of equity trading at Themis Trading. “Just as you thought you were getting relief in the supply chain, we may take another hit.”

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He said potential economic losses could negate expectations of a rate hike by the Federal Reserve later this year. Investors are turning their attention to Federal Reserve monetary policy meetingwhich concludes on Wednesday. The central bank is expected to raise its benchmark interest rate for the first time since 2018 as officials look to cool demand and bring inflation under control. She navigates an extraordinarily complex environment of a tight job market, supply turmoil and, most recently, the war in Ukraine.

American bank

Economists said they expect the Fed to remain aggressive this year and next amid rising inflation concerns. Bank of America economists said in a note on Monday that US central bank governors, led by Federal Reserve Chairman Jerome Powell, are likely to raise interest rates five times this year and four times in 2023.”[W]Expect a tough message from President Powell, who is likely to reiterate that the Fed needs to get serious about price stability,” Bank of America said.

China’s Shanghai Composite Index fell 2.6% After Shenzhen went into lockdown to contain the coronavirus. In Europe, the Stoxx Europe 600 Index rose 0.9%, led by shares of automakers and banks.

The shutdown could hamper demand for oil, and Brent crude futures, the international benchmark, fell 5.6% to $103.19 a barrel.

“The shutdown in Shenzhen and the potential shutdown in Shanghai have cooled the enthusiasm of traders,” said Tom Kluza, global head of energy analysis at OPIS, owned by Dow Jones & Co., owner of the Wall Street Journal.

Mr. Kloza said oil prices also reflected a temporary break in the enthusiasm of traders, which he said reached a record high last week according to some measures. A week ago, Brent crude prices hit $139 a barrel, the highest since 2008, as the war in Ukraine disrupted global commodity markets. This has sent gasoline prices to record levels, raising concerns that pinching consumers may slow spending as spring and summer approaches.

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The yield on the 10-year Treasury rose to 2.1% on Monday from 2.004% on Friday. Yields are moving in the opposite direction to bond prices and are on track to reach their highest close since July 2019.

The benchmark S&P 500 index has fallen in four of the past five weeks.


Photo:

Spencer Platt / Getty Images

Elsewhere in commodity markets, Nickel trade remained suspended On the London Metal Exchange, which halted the market last week to contain a Big price hike.

Despite hopes for negotiations, the Conflict is increasing There is growing concern among officials and investors that the war could spread beyond Ukraine. A Russian air strike on a Ukrainian military training center near the Polish border killed 35 people on Sunday. Russia has asked China for military equipment and other aid for its war effort, according to US officials.

Commodity prices are hot now. But the prices that investors pay in the open market for commodities such as coffee, copper or corn have nothing to do with the price customers pay in the store. WSJ’s Dion Rabouin explains. Illustration: Adele Morgan

Write to Joe Wallace at [email protected]

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