Stocks gave up earlier gains on Monday as investors watched continued talks between Russia and Ukraine ahead of Wednesday’s Federal Reserve decision. Tech stocks were hit hard.
Dow Jones Industrial Average
closed a point, while the
decreased by 0.7%. the
fell 2%. All three major indices were in the green earlier in the day.
“The day began with some optimism that the peace talks would bring progress,” wrote Michael Reinking, chief market strategist at the New York Stock Exchange. “However, the situation on the ground did not confirm it.”
Member of the Russian delegation for negotiations with Ukraine, Leonid Slutsky, said there had been “significant progress” in peace talks between the two sides, according to reports.
This helped to lower the price of oil. WTI crude oil fell 7% to around $101 a barrel. It is now down from the multi-year high of $130 hit a week ago. Markets fear that a continued conflict between Russia and Ukraine could prompt Western nations to sanction Russian oil – the United States has already imposed restrictions on Russian oil imports – which will significantly reduce supply world. This would only add to the heavy inflation that has hit consumers.
Lower oil prices initially helped stocks gain, but the market is still prone to a sell-off like the one seen on Monday afternoon as macro uncertainty remains high. There may be chatter from Russia and Ukraine about a resolution, but there is no concrete evidence yet as Russian attacks in Ukraine rage.
Stocks across the board gave up gains “as optimism about diplomatic efforts to end the war in Ukraine fades,” wrote Edward Moya, senior market analyst at Oanda.
Additionally, the Federal Reserve is announcing its interest rate decision this week. Markets expect the Fed to raise the benchmark benchmark rate by a quarter of a percentage point, but will be on the alert if the central bank signals a more aggressive rate hike path going forward. An aggressive Fed could mean even slower economic growth.
All in all, “with a perfect storm of market drivers – inflation at historic highs, extreme geopolitical tensions and an impending Fed decision – there are not a ton of signs that volatility is going to s ‘mitigate,’ wrote Chris Larkin, chief trading officer. at ETrade.
On the Fed in particular, “Wednesday’s expected rate hike comes at a delicate time, as we currently face a slowing economy…and runaway energy and food inflation,” wrote Danielle DiMartino Booth, CEO and Chief Strategist of Quill Intelligence and former Advisor. to the President of the Dallas Fed.
Treasury yields rose across all maturities on Monday, with 5-, 7- and 10-year bonds selling the most as concerns over Wednesday’s Fed meeting outweighed worries over the conflict in Ukraine. The benchmark 10-year yield rose 14 basis points, or hundredths of a percentage point, to 2.13%. Financial markets are now pricing in a 25 basis point rate hike at this week’s meeting and a 50 basis point hike at the May or June meeting.
As for the tech-heavy Nasdaq, it underperformed other indexes for good reason. Since March 1, the 10-year Treasury yield has fallen from 1.72% to 2.1% as the price of the note has fallen. As markets grew slightly more optimistic about the outcome of the Russian-Ukrainian war — and the Federal Reserve is almost certainly set to raise interest rates on Wednesday — investors dumped government bonds sure.
Now, the 10-year yield is just around its pandemic-era peak, and if it breaks above that level, it could signal a sustainable upside in yield. That’s bad for tech stocks, because higher long-term bond yields make future earnings less valuable, and many tech companies are valued on strong earnings many years down the line.
The picture was mixed abroad, where the pan-European
climbed 1.2%, but Hong Kong
Hang Seng Index
Here are six stocks in motion on Monday:
After sharp declines in Hong Kong, listed US stocks from
(BABA) fell 10%, with
(JD) down 11%.
(0700.HK) The 9.8% drop in Hong Kong was compounded by a Wall Street Journal report that the company faces a record fine for breaching China’s anti-money laundering regulations.
(DB) gained 8.6% after Berenberg moved the bank from Hold to Sell.
(NKTR) fell 61% after the company announced that its experimental bempegaldesleuk therapy, which combines with
Bristol Myers Squibb
Opdivo, failed. The combination was to treat melanoma.
(OMC) rose 4.4% even after being downgraded to Equal Weight from Overweight at Barclays.
—Alexandra Scaggs contributed to this article