Topline
The stock market tumbled on Wednesday as oil prices spiked yet again due to supply disruptions from Russia’s invasion of Ukraine, and investors face renewed inflation fears even after the Federal Reserve pledged to more aggressively raise interest rates in a bid to fight surging prices.
Markets are facing a “harsh reality” as geopolitical risks add to inflation fears.
Key Facts
Stocks fell as oil prices surged: The Dow Jones Industrial Average fell 1.3%, around 450 points, while the S&P 500 lost 1.2% and the tech-heavy Nasdaq Composite 1.3%.
Investors continue to assess the ongoing war between major oil exporters Russia and Ukraine, as the Biden administration prepares a new round of sanctions and NATO sends more troops to its eastern flank.
Markets have taken a hit from the surging commodity prices that have resulted from the conflict, with experts warning that higher prices will hit consumers and exacerbate inflation—especially if the European Union decides to follow the United States in banning Russian oil imports.
Oil prices jumped in volatile trading again on Wednesday amid growing concerns over supply disruptions from Russia’s invasion of Ukraine, as “the drop in Russian crude exports finally appears underway,” according to Matt Smith, lead oil analyst for the Americas at Kpler.
The price of U.S. benchmark West Texas Intermediate jumped 5% and now stands at $115 per barrel, while international benchmark Brent crude trades at around $121 per barrel.
Government bond yields, meanwhile, have continued to surge higher this week after the Federal Reserve vowed to be more aggressive in its fight against inflation: The 10-year U.S. Treasury note surpassed 2.41%—its highest level since May 2019—on Wednesday.
Surprising Fact:
Meme stocks GameStop and AMC Entertainment skyrocketed on Wednesday, surging 12% and 15%, respectively. Retail investors have piled into both stocks this week, with the latest boost coming from news that Billionaire Ryan Cohen, the cofounder of pet-supply company Chewy, invested another $10 million into GameStop.
Crucial Quote:
Markets are down as the “harsh reality sets in that the Fed most likely won’t be able to navigate a soft landing as geopolitical risks will continue to keep upward pressures on prices,” says Edward Moya, senior market analyst at Oanda. “The Fed will either have to tighten policy so much that it sends the economy into a recession, or it will once again have to flip flop and prevent policy from becoming too restrictive.” Stocks will also continue to struggle as geopolitical risks send energy prices even higher, Moya predicts.
What To Watch For:
“The big question now is whether all this prospective Fed tightening will push the economy into recession or whether policymakers can achieve the much sought-after ‘soft landing’ that avoids one,” said Deutsche Bank strategist Jim Reid in a recent note.
Further Reading:
Analysts Say These Stocks Can Rally 30% Or More As Investors Navigate A ‘Perfect Storm Of Headwinds’ (Forbes)
Stocks Jump As Investors Prepare For Bigger Fed Rate Hikes To Fight Inflation (Forbes)
History Shows Investors Who Buy During Bear Markets Will Likely See Huge Gains (Forbes)
Federal Reserve’s Long-Awaited Rate Hike Is Here: Powell Announces 0.25% Increase (Forbes)
Source: https://www.forbes.com/sites/sergeiklebnikov/2022/03/23/dow-falls-400-points-as-supply-disruptions-send-oil-prices-surging-higher/