U.S. stocks fell and oil prices climbed, as concerns about rising commodity prices and uncertain progress in cease-fire talks between Russia and Ukraine weighed on investors.
A selloff accelerated on Wednesday afternoon after major indexes spent much of the day narrowly in the red. That left stocks on track to lose ground in the 2022’s first quarter, but poised to finish March with solid gains after a rally in recent weeks.
As the month wraps up, investors are still contending with war in Ukraine, surging inflation and a Federal Reserve that has begun raising interest rates for the first time since 2018. Yet traders have continued to pile into U.S. equities, with the S&P 500 up about 5% for the month.
The S&P fell 0.9% Wednesday, while the tech-focused Nasdaq Composite Index lost 1.4%. The Dow Jones Industrial Average was recently down 0.5%. A day earlier, major U.S. stock indexes had jumped, extending the S&P 500’s winning streak to four sessions.
Strategists and investors say the recent rebound is fragile—especially as hopes for a speedy end to the war remain dim.
“It just seems like markets are still trying to digest the rally they’ve seen since Russia invaded Ukraine,” said
Jake Manoukian,
the U.S. head of investment strategy for J.P. Morgan Private Bank.
Big swings in everything from oil prices to Treasury bonds have sometimes weighed on sentiment this month. On Wednesday, rising oil prices helped pull stocks lower. Brent crude, the international benchmark for oil prices, rose about 2.7% to $110.64 a barrel. In Europe, natural-gas prices, which are often volatile, jumped after Germany indicated it was bracing for a possible reduction of Russian gas supplies.
Oil and gas were already growing more expensive even before Russian tanks crossed the Ukrainian border last month, as the recovery from the Covid-19 pandemic fueled higher demand. Now, some investors worry that higher fuel costs and energy-market volatility are straining budgets for consumers and businesses, dimming the outlook for economic growth.
“Sharp movements in oil prices can really drive up the cost at the pump and take away our ability to spend on other items,” said
Luke Tilley,
the chief economist at Wilmington Trust Investment Advisors.
Investors were also digesting increasing skepticism over peace talks in Eastern Europe on Wednesday. Kremlin spokesman
Dmitry Peskov
said that talks with Ukrainian negotiators in Istanbul had not moved the two countries closer to an agreement that would end Russia’s invasion.
“I think those hopes have faded away,” said
Susannah Streeter,
senior investment and markets analyst at Hargreaves Lansdown.
Energy stocks—some of the market’s best performers so far this year—traded higher, with
and
each adding at least 3.5%. The S&P 500’s energy sector was recently up 0.8%.
Meanwhile, shares of
climbed about 10% after posting higher revenue and profit for the fourth quarter.
fell 8.2%, giving up some of its large Tuesday gains after the brokerage app said it was extending the hours users could trade.
Several of the companies favored by retail traders dropped too.
was down 15%. Movie-theater chain
and
a videogame retailer, also declined.
In the bond market, traders kept a careful watch on the difference between short- and long-term interest rates. When they converge, it is often taken as a sign of pessimism about economic growth. On Tuesday, these rates briefly inverted, with yields on two-year U.S. Treasurys surpassing those on the 10-year benchmark note for the first time since 2019. Some investors consider that pattern, known as an inverted yield curve, a signal of coming recession.
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Read More: Stocks Extend Losses as Oil Prices Rise