The Dow Jones Industrial Average increased 654 points or 2% to close at 33 286. The S&P 500 gained 3.6% to end a four-day losing streak. Meanwhile, the tech-rich Nasdaq composite gained 3.6%. These big swings have been shaking markets in recent weeks as investors attempt to gauge the economic impact of Russia’s invasion Ukraine. This volatility has affected markets not only daily but hour-to-hour. Some days have seen several large reversals.
With so much uncertainty about the future of Ukraine’s war and its eventual economic collapse, chaos is only going to increase. Because it is a major producer and exporter of oil, wheat, and other commodities, the region is crucial to markets. As a result, its prices have risen due to concerns about supply disruptions.
With inflation so a major concern, stocks moved again in the opposite direction to oil prices. Analysts believe bargain hunters could be buying stocks following concerns about a slowing economy and high inflation that triggered the steep slide.
“Glimmers of hope”
Many of these buyers are smaller-spending, “retail” investors who trade on their smartphones and laptops. They are often buying shares that large professional investors are selling. Investors are also taking inspiration from the meeting between Dmytro Kuleba, Ukrainian counterpart, and Sergei Lavrov, Russian Foreign Minister.
“Equity markets have a bid right now as markets are holding out to the faintest hope of de-escalation when Ukraine and Russia’s finance ministers meet in Turkey tomorrow,” Anu Gagagar, global investment strategist at Commonwealth Financial Network, stated in an email. Markets could also be experiencing a break in a downtrend, and some consolidation because of oversold conditions.
According to reports, the United Arab Emirates will press other OPEC members for increased production and less supply worries. Crude oil prices fell and continued to slide. One barrel of U.S. crude oil fell 12.1% to $108.70. Brent crude oil, an international standard, dropped 13.2% to settle in at $111.14
After record-breaking gas prices on Wednesday, the dip may offer some relief for motorists in the United States. After Tuesday’s record of $4.17 per gal, the national average now stands at $4.25 per g. This is the highest level ever.
Jamie Cox, managing director of Harris Financial Group said that markets were priced as if the Straits of Hormuz were blocked, which was simply not fair. It’s not as if the Middle East went offline suddenly. Markets are often prone to a ‘hair on fire,’ which can lead to tremendous value for people who pay attention to price dislocations.
According to Jill Carey Hall, strategist at BofA Global Research, record-breaking selling of U.S. stocks was witnessed last week by hedge funds. Net buyers were both institutional and retail investors.
Retail investors might be worried about missing any possible rebound. After the 2020 coronavirus crash, a “buy-the dip” strategy was extremely successful. This strategy saw stock drops as opportunities to buy lower and was highly profitable. From that 10% drop, the S&P 500 continued to climb until recently.
Markets have seen big moves in recent months that show that prices reflect a lot pessimism. Crude oil prices are up over 50% so far for 2022. After President Joe Biden declared a U.S. ban on Russian oil imports , crude oil prices fell on Tuesday.
Although a ban could cause disruptions in supplies, oil traders might have already accounted for it when they temporarily pushed the price U.S. crude oil above $130 just before the announcement.
The decline in gold prices was accompanied by a decrease in Wall Street anxiety among investors.
Rising energy prices due to Russia’s invasion in Ukraine will cause a shock even worse for European countries than it did for the U.S. This could lead to the European Union taking more action to support its economy. Stephen Dover, chief strategist for markets and head of Franklin Templeton Investment Institute, stated that the result could be more stimulus or more caution by central banks regarding interest rate rises.
“While the U.S. will be able to see stimulus falling, Europe could actually see the wind in its sails.”
Wall Street saw broad gains with almost 90% of the S&P 500 stocks rising led by technology companies. The strongest moves were made by airlines, travel companies, and other stocks that rebounded from sharp drops due to concerns about fuel prices and the economy.
Fed sets rate hike target
As the Federal Reserve’s expected increase in interest rates nears, Treasury yields rose. Next week’s Fed policy-making committee meeting will see the expectation that they will vote to increase its benchmark short-term interest rate by 25%. This would be the first increase in short-term rates since 2018.
As it raises rates through 2022, the Fed faces a difficult and more difficult task. This tends to slow down the economy. The central bank wants rates to be raised high enough to lower inflation, which is currently at its highest point in many generations. It doesn’t want them to go too high that they cause a recession.
Dover stated that there is more uncertainty now about the Fed’s actions than just a few days ago.
The 10-year Treasury yield rose to 1.94%, from 1.86% on Tuesday.
After Biden signed an executive ordering on government oversight of crypto, bitcoin’s value soared by nearly 9% to $42,000. The majority of crypto players are expressing their support for increased regulation and want to be involved in shaping it.
