Topline
The stock market jumped on Wednesday—despite oil prices skyrocketing to their highest level since 2011 amid Russia’s invasion of Ukraine—as Federal Reserve Chairman Jerome Powell told Congress that the central bank plans to raise interest rates by a quarter-percentage-point this month as it looks to combat surging inflation.
Stocks rebound despite surging oil prices as the Russia-Ukraine conflict escalates.
Key Facts
Stocks rebounded on Wednesday: The Dow Jones Industrial Average rose 2.1%, around 700 points, while the S&P 500 gained 2.1% and the tech-heavy Nasdaq Composite rose 1.8%.
The market moved broadly higher even as oil prices continued to skyrocket due to Russia’s invasion of Ukraine, with financials, energy and industrial stocks leading the gains.
Oil prices, which have surged higher in recent weeks, jumped to their highest level since 2011 on Wednesday: U.S. benchmark West Texas Intermediate crude jumped to roughly $110 per barrel, while global benchmark Brent crude rose to nearly $112 per barrel.
Federal Reserve Chairman Jerome Powell, meanwhile, said in testimony before Congress that the central bank plans to begin raising interest rates—beginning with a 0.25% rate hike in two weeks—amid mounting pressure to combat surging inflation, which remains at 40-year highs.
The Fed chairman did add, however, that the central bank is closely monitoring the Ukraine conflict and subsequent Western sanctions against Russia: “The implications for the U.S. economy are highly uncertain,” Powell said, adding the Fed will “need to be nimble” and “proceed carefully.”
Even as Russian and Ukrainian officials prepare for a second round of negotiations on Wednesday, Russia’s military recently seized control of the southern city of Kherson, while the city of Kharkiv reported fresh missile strikes.
Crucial Quote:
“Investors are being whipsawed by a series of macro and micro cross-currents,” says Vital Knowledge founder Adam Crisafulli. He anticipates “some type of a Russia-Ukraine détente” because Moscow’s economic predicament under harsh sanctions is “completely untenable,” while Fed chair Powell “helped to de-risk the upcoming Fed meeting” by clarifying his approach for upcoming rate hikes and withdrawing stimulus.
What To Watch For:
While Powell said he will propose a 0.25% rate hike in March, he also didn’t rule out the possibility of raising rates “more aggressively” than just 25 basis points per meeting if higher inflation persists later this year. The Fed chairman also confirmed that the central bank plans to start reducing its balance sheet “in a predictable manner” after the rate-hiking cycle begins this month.
Further Reading:
Rate Hikes Are Coming In March Despite ‘Uncertain’ Impact From Russia’s Invasion Of Ukraine, Powell Says (Forbes)
Dow Falls 600 Points, Oil Prices Surge As Russia-Ukraine Conflict Continues To Roil Markets (Forbes)
Oil Prices Hit New Seven-Year High At $105 Per Barrel As Russian Assault On Kyiv Sparks Supply Fears (Forbes)
Economic Fallout From Russia’s Invasion Will Be ‘Modest’—But Inflation Will Surge Higher, This Expert Predicts (Forbes)
Source: https://www.forbes.com/sites/sergeiklebnikov/2022/03/02/dow-jumps-700-points-oils-hits-11-year-high-as-investors-are-whipsawed-by-rate-hikes-and-russia-ukraine-conflict/