Stocks Fall, Oil Prices Gain as EU Commits to Partial Russian Crude Ban
A pledge among European Union leaders to curb oil purchases from Russia lifted crude prices, while U.S. stocks fell, reigniting volatility in the markets during the last trading session of the month.
The S&P 500 dropped 0.7% Tuesday, a day after U.S. markets were closed for Memorial Day. The benchmark index had risen 0.6% for the month through Friday, putting it on track to steady after April’s 8.8% loss. The Dow Jones Industrial Average shed 1.1%, while the Nasdaq Composite Index edged down 0.4%.
Crude prices rallied after EU leaders said for the first time that they would impose an oil embargo on Russia over its invasion of Ukraine. The embargo would include an exemption for oil delivered from Russia via pipelines, an amount that makes up one-third of EU oil purchases from Russia.
Futures for Brent crude, the global benchmark, rose 2% to $119.92 a barrel. West Texas Intermediate, the U.S. marker, rose 3.6% to $119.16 a barrel, playing catch-up after the market was closed Monday.
Tuesday’s session will cap another volatile trading month, during which stocks around the world swung wildly as traders tried to assess the outlook for global economies. In the U.S., stocks tumbled shortly after the month began and continued falling amid a slew of earnings and economic data that came in worse than expected.
Throughout the month, profit warnings from companies ranging from Snap to Target intensified worries about the lingering impact of inflation, and spurred investors to dump shares across several industries.
By mid-May, it seemed the S&P 500 was bound to close in a bear market, defined as a drop of 20% or more from a recent high. But a late-month rally sent stocks racing higher and helped the benchmark index trim its losses. The S&P 500 is now down 13% from its January high, based on Friday’s close.
Professional and individual investors alike have waded into the recent rally in the U.S. markets, finding opportunities to scoop up stocks that have seen their valuations fall. However, many investors remain aware that the issues that sent stocks falling earlier this month have yet to abate.
Many traders remain worried that the Federal Reserve’s plans to raise interest rates aggressively could tip the U.S. economy into a recession. Meanwhile, concerns about an economic slowdown in China and sustained supply-chain disruptions due to the pandemic and the war in Ukraine have continued to weigh on investors’ minds.
“There’s a bit of market uncertainty just about the pretty rapid rally we’ve had,” said Brooks Macdonald Chief Investment Officer
“and whether that can be sustained in a world where inflation is clearly still a factor.”
Later Tuesday, investors will parse the latest data on consumer confidence to get a better understanding of Americans’ economic outlook. President Biden is also expected to meet with Fed Chairman
Tuesday at the White House.
In early trading in New York, retailers, travel stocks and home builders were among those that traded lower. Energy companies, in contrast, rose, tracing oil prices higher.
each jumped 3% or more.
U.S.-traded shares of
jumped 7.4% after the consumer-goods company said it would add activist investor Nelson Peltz to its board and disclosed his fund now holds a 1.5% stake.
The S&P 500’s energy sector is on track to finish May with the largest gain among the benchmark index’s 11 groups, extending a trend that has flourished for much of 2022. But even some of the market’s riskier bets are on pace to end the month in the green.
is now up for the month of May, based on Friday’s closing prices, while pandemic darlings including Netflix and Zoom Video Communications are on course to end the month higher, too.
“When the S&P 500 is [close to entering] a bear market, that has a big psychological impact on those seeking value,” said
senior market analyst at Oanda. “I think the question repeatedly being asked is, ‘Are we seeing a bottom in the markets?’”
In the bond market, the yield on 10-year Treasury notes rose to 2.842% from 2.748% Friday, reversing a recent trend of declines. Yields had fallen from their 2022 high of more than 3.1% in recent weeks as investors dialed down expectations of how far the Federal Reserve will raise interest rates to curb inflation. Bond yields and prices move in opposite directions.
International stock markets were mixed. The pan-continental Stoxx Europe 600 fell 0.5%, on pace to snap a four-session winning streak after eurozone inflation rose faster than expected and reached a record. Consumer prices rose 8.1% on the year in May after climbing at a 7.4% rate in April. The inflation report will likely factor into the European Central Bank’s coming interest-rate decisions. Earlier this month, ECB President
indicated that the central bank could increase its key interest rate in July for the first time in 11 years.
Declines during the European session were broad. Shares of banks, travel stocks and retailers were among those to decline. In contrast, Tuesday’s gainers included Norway’s
Spain’s Repsol and London-listed
—energy companies which stand to benefit from the advance in oil prices.
In Asia, the Shanghai Composite Index rose 1.2% after the city’s government said a two-month lockdown would be lifted Wednesday. The shutdown, designed to limit Covid-19 transmission, had slowed the Chinese economy and added to inflationary pressures elsewhere in the world by gumming up supply chains. Hong Kong’s Hang Seng rose 1.4%. Japan’s Nikkei 225 bucked the trend, falling 0.3%
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