Following four weeks of straight falls, stocks down again on Monday, as investors were highly concerned about the increased energy prices resulting from the Ukraine- Russia war would slow down the economy and create inflation. The Dow Jones Industrial Average 797.42 points down to close around 32,817.38, pulled down by about 8% loss in American Express. The Nasdaq Composite, down 3.6% to 12,830.96, now sits in the bear market area. The S&P 500 fell 3% to close around 4,201.09, falling deeper into the correction territory.
As the Ukraine- Russia conflict unfolds, the investors keep an eye on the potential economic consequences of disruptions in the global energy supply.
“As a result, ‘stagflation’ is rapidly becoming the primary focus portfolio strategies,” stated Jim Paulsen, the Leuthold Group’s chief investment strategist. “Investor fears and actions are being driven by their preparation for weaker GDP and higher inflation.”
Because of the ongoing war between Ukraine and Russia, the oil prices hit a higher level since 2008 on Sunday. The global benchmark Brent crude oil spiked to 139.13 dollars per barrel-its highest level since July 2008. WTI (West Texas Intermediate) crude futures, the U.S. oil benchmark, hit 130 dollars per barrel. West Texas Intermediate oil settled up 3.2% at 119.40 dollars.
Along with the oil prices, the Energy stocks also rose. Chevron stock leads the upside trend with a 2.1% gain. The Baker Hughes stock rise upside with a 4.7% gain. Exxon Mobil stock increased by 3.6%.
On Monday, the bank stocks were the biggest losers. The U.S. Bancorp stock is down around 3.9% as investors are more concerned about slower economic growth. Citigroup stock fell 1.8%.
Nike, Starbucks, and McDonald’s McDonald’s entire stocks value dropped on Monday as consumers worried about the impact of $4 gas prices on their wallets.
According to AAA (American Accounting Association), the gas prices rose to their highest level, with the national average rise upside around $4.06 a gallon on Sunday. The cruise lines, travel, and Airlines stocks are down for the same reason.
Due to Russia’s war on Ukraine, the Secretary of State Antony Blinken stated that the United States and its allies consider banning Russian natural gas and oil imports.
In a letter to the Democratic colleagues, House Speaker Nancy Pelosi also stated that the house is “exploring tough legislation” to prohibit the import of Russian oil, which would “further isolate Russia from the global economy.”
Kathy Bostjancic, the chief U.S. economist at Oxford Economics, stated. “The equity market is grappling with the significant commodities supply shock, particularly oil prices, and is afraid that it may be transforming into a stagflationary shock; rather than just an inflation shock.”
Forecasters predict that the United States’ economy will expand more slowly due to more significant inflation. Europe’s economy will be on the verge of recession, and Russia’s GDP will decrease by double digits due to the geopolitical confrontation.
Wall Street has already begun to react to the reduced growth rate. Due to geopolitical concerns, top strategists from Citi to UBS, Yardeni Research, and Evercore ISI have reduced their U.S. equity outlook. Long-time market bull Ed Yardeni has transformed into one of Wall Street’s greatest bears, with the S&P 500 falling 16 % to 4,000 in 2022.
Despite the shift away from risk, the government bond yields have risen, showing that safe-haven investments are no longer in demand. The 10-year Treasury note was last trading at 1.77%, up slightly from the previous session as inflation fears higher rates.
The positive data from The United States Department of Labor was not sufficient for the investors to ignore the concerns about the conflict between Ukraine and Russia.
The Bureau of Labor Statistics announced that the economy added 678,000 jobs in February. According to Dow Jones, the monthly job gain exceeded economists’ projections of 440,000. The unemployment rate has dropped to 3.8%.
Last week S&P 500 and Dow slid around 1.3%. The Dow marked its fourth losing week. The Nasdaq Composite is fell roughly 2.8%.
The various economic data reports are scheduled to release this week, including the February consumer price index, which will release on Thursday. According to the key indicator, inflation has increased 7.8% from a year ago.
The Federal Open Market Committee meets on March 15-16, and it is expected to approve a quarter-point hike in the benchmark short-term borrowing rate.
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