Soaring Stocks, Falling Oil, Extending Volatility Amid War in Ukraine

U.S. stocks surged and oil prices fell on Wednesday, extending a period of volatility as investors track the economic fallout from war in Ukraine.

The S&P 500 rose 2.2%, while the technology-focused Nasdaq Composite Index gained 2.7%. The Dow Jones Industrial Average advanced 607 points, or 1.9%. All three indices are set to snap a four-game losing streak.

The war in Ukraine has fueled big moves in stocks, commodities, currencies and bonds. For investors, analyzing the direction of the conflict, the rapid evolution of Western sanctions against Russia and their effects on the global economy is a challenge. The turbulence sent stock indexes soaring, wiping out much of last year’s gains. The Dow Industrials and Nasdaq, which entered a bear market, closed Tuesday at levels last seen about a year ago.

A spike in oil prices, given further impetus by the U.S. embargo on Russian energy, raised fears that sustained inflation and weaker economic growth could collide. Major central banks were on track to start tightening monetary policy before Russia invaded Ukraine. The European Central Bank meets on Thursday. Federal Reserve Chairman Jerome Powell said last week that he plans to offer a quarter-percentage-point rate hike at the central bank’s meeting this month.

“Market sentiment and daily movement, and even intraday movement, has certainly been skewed by the headlines surrounding the conflict in Ukraine,” David Sekera said, Morningstar.it’s

Chief US Market Strategist. Mr. Sekera said investors who are overweight energy stocks should consider looking into equities.

Brent futures, the international benchmark, fell 5.6% to $120.86 a barrel, reversing gains from the start of the session. The United States has banned imports of Russian oil and gas, while Russian President Vladimir Putin has issued an executive order banning exports of unspecified commodities and raw materials.

The stock market jump prompted investors to retreat from safe-haven assets on Wednesday. The ICE US Dollar Index, which tracks the currency against a basket of others, fell 0.9%, falling after a winning streak that pushed the greenback to its highest level in nearly two years. The yield on 10-year Treasury bills rose slightly to 1.917% from 1.870% on Tuesday. Yields and bond prices move in opposite directions.

The price of gold, another asset investors perceive to be safer, fell 2.3%. Trading in the nickel market was suspended for another day, following sharp moves on Tuesday that sent the metal surging to briefly break above $100,000 a tonne for the first time.

President Biden announced a ban on Russian oil imports into the United States on Tuesday, amid growing calls from bipartisan lawmakers to act. Photo: Kevin Lamarque/Reuters

At the start of trading in New York, travel stocks rallied, while energy stocks declined. Cruise lines Carnival and Royal Caribbean gained 9.6% and 6.1% respectively. American Airlines Group and United Airlines Holdings gained 5.8% and 12% respectively. In contrast, Occidental Petroleum fell 2.6%, Halliburton 5.4% and Marathon Oil 3.9%.

In Europe, the London-listed shares of Polymetal International,

a Russian precious metals company, jumped 60%. Bank stocks also surged. Raiffeisen Bank International in Austria,

which made about a third of its pre-tax profit in Russia last year, gained 15%. Societe Generale,

which also has exposure to Russia, jumped 11%. UK-based low-cost airline easyJet jumped 14%.

“It looks like the markets are taking a breather today,” said Viraj Patel, global macro strategist at Vanda Research. “I don’t think…a lot of investors think we’re in a new regime and the worst is over – I think it’s more of a rebound and profit taking. [on safe havens] just the start of a new reversal.

In the cryptocurrency market, bitcoin rallied back from its recent dip, rising about 9.6% from its 5 p.m. ET closing price to trade around $42,224. On Wednesday, President Biden will sign an executive order directing federal government agencies to consider creating a US digital currency.

A trader on the New York Stock Exchange on Tuesday.


Photo:

Courtney Crow/Associated Press

Overseas, the pancontinental Stoxx Europe 600 index jumped 3.5%. The Russian stock market remained closed, although its currency exchanges were open. In the offshore market, the ruble fell slightly in volatile trading to around 128 rubles per dollar. Russian currency prices have been volatile since the country imposed measures to stem its sale, and Western banks have shunned Russian assets.

In Asia, stocks fell broadly, following Tuesday’s session on Wall Street. Japan’s Nikkei 225 lost 0.3%, while Hong Kong’s Hang Seng index fell 0.7%. The Shanghai Composite fell 1.1%.

—Caitlin Ostroff contributed to this article.

Write to Caitlin McCabe at [email protected] and Joe Wallace at [email protected]

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