U.S. stocks fell and Treasury yields pushed higher after inflation accelerated for a sixth successive month and the Russian attack on Ukraine showed no sign of letting up. Oil declined and the dollar rose.
The S&P 500 ended down but well off session lows, with tech stocks leading the retreat. Treasuries fell across the board, sending the 10-year Treasury yields to levels not seen since Feb. 25 and the 30-year rate to the highest since May 2021 after data showed inflation running at the fastest pace in 40 years. Oil dropped below $107 a barrel in New York amid concern surging prices could hasten the onset of demand destruction.
Markets have whipsawed since Russia invaded Ukraine two weeks ago, with U.S. stocks this week experiencing the biggest swings of gains and losses since 2020. Commodity prices have also gyrated as investors grapple with uncertainties surrounding Russia’s attack on Ukraine and supply disruptions, while inflation showing sign of slowing keeps pressure on policy makers to hike rates and threatens to curb economic growth.
“The market likely already priced the inflation increase in accordingly, and is instead intently focused on Ukraine and the downstream impact from commodities, which are already sending shockwaves through the market,” said Mike Loewengart, managing director of investment strategy at E*Trade from Morgan Stanley. “Bottom line for investors: Strap in for a bumpy ride, but keep your wits about you and don’t react emotionally.”
Goldman Sachs to Exit Russia in Wall Street’s First Pullout
Ukraine and Russia failed to make progress in halting the war and bridging the vast differences between them at the first high-level talks between their foreign ministers since the Russian invasion began. Sentiment was boosted Wednesday after a top foreign policy aide to Ukraine’s president said the country was open to discussing Russia’s demand for neutrality as long as it was given security guarantees.
While the jump in U.S. consumer prices was in line with forecasts, it reinforced expectations that the Federal Reserve next week will start raising interest rates to contain inflation that some economists see rising above 8%. That’s because the Ukraine war and U.S. President Joe Biden’s ban on Russian energy imports tightened oil supplies.
U.S. Inflation Hit Fresh 40-Year High of 7.9% Before Oil Spike
U.S. Inflation Broadens as Two-Thirds of Index Jumps 4% or More
Comments
- “Expectations were already high for today’s U.S. inflation number, but the 7.9% print today wasn’t helpful for the Fed following the oil price rises we have seen in recent weeks,” wrote Nick Chatters, investment manager at Aegon Asset Management. “It seems that the Fed is going to have to react to the possible spiral scenario, where wages race higher in chase.”
- “I don’t think the war has knocked any of the central banks off their policy of trying to normalize rates in reaction to inflation,” said Chris Gaffney, president of world markets at TIAA Bank. “Inflation is certainly high. This morning’s print, it’s uncomfortable.”
- “The biggest risk is inflation,” said Fiona Cincotta, senior market analyst at City Index. “Even though central banks will try and rush to get through as much tightening as possible in the first half of the year, I think looking further out, they gonna struggle if growth really starts to take a hit.”
- “The key here is that shelter and food, not used cars are driving the print. Combined with the decline in real wages, this locks in the Fed’s compass,” said Max Gokhman, chief investment officer for AlphaTrAI. “Of course with the Russian invasion showing no sign of abating, it’s unlikely the next headline reading will be below expectations. The market reaction is investors finally pricing in that this war will make the Fed more, not less hawkish.”
- “After months of laying the groundwork for a steady and substantial tightening in monetary policy over the next year, the Fed now faces a sudden change in the economic outlook,” Richard Flynn, managing director at Charles Schwab U.K. Ltd., wrote in a note. “That said, the Fed will likely be reticent to stall rate hikes in the short term.”
Amazon.com Inc. jumped 5.4% after announcing a share split and a $10 billion buyback plan. Crowdstrike Holdings Inc. soared 13% after posting strong results. Oracle Corp. fell in postmarket trading after reporting quarterly results.
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Some of the main moves in markets:
Stocks
- The S&P 500 fell 0.4% as of 4 p.m. New York time
- The Nasdaq 100 fell 1.1%
- The Dow Jones Industrial Average fell 0.3%
- The MSCI World index fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index rose 0.4%
- The euro fell 0.9% to $1.0979
- The British pound fell 0.7% to $1.3085
- The Japanese yen fell 0.3% to 116.12 per dollar
Bonds
- The yield on 10-year Treasuries advanced three basis points to 1.99%
- Germany’s 10-year yield advanced six basis points to 0.27%
- Britain’s 10-year yield was little changed at 1.52%
Commodities
- West Texas Intermediate crude fell 2.2% to $106.36 a barrel
- Gold futures rose 0.8% to $2,003.90 an ounce
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