The Dow drops more than 700 points and enters the correction zone

The Dow drops more than 700 points and enters the correction zone

The Dow Jones Industrial Average fell nearly 800 points, putting the blue-chip gauge in correction territory, as rising oil prices deepened concerns about economic growth.

Selling stocks also put the Nasdaq Composite Index in a bear market, defined as a 20% drop from its recent high. Moves through the start of 2022 had already sent the S&P 500 into correction territory, defined as a drop of at least 10% from its recent high. The Dow Jones Industrial Average joined other indexes in correction territory on Monday as the rise in oil prices threatens to fuel rising inflation.

Investors fear that the consequences for the financial markets of the war in Ukraine, Now on its twelfth day, can reach farther than initially thought. The conflict has already disrupted commodity markets, increased and led to tensions between Moscow and the West Russia is being separated of most of the global financial system.

“The market is on increasingly shaky ground,” said Hans Olsen, chief investment officer at Fiduciary Trust. “When you combine the price shocks we’re seeing in the energy complex on the one hand and the accelerating inflation we’re dealing with on the other, it’s a really tough combination for the stock market to make valuations where we’re right currently.”

The Dow Jones Industrial Average recently fell 2.4%, or about 797 points, after four consecutive weeks of losses. They are down about 11% from their January high.

The S&P 500 is down 2.95%, bringing its decline in 2022 to nearly 12%. The heavy Nasdaq Composite lost 3.6%, is down 18% year-to-date and more than 20% from its highs. S&P 500 . Index entered into a correction On February 22, while the Nasdaq Composite Index fell into the patch On January 19.

Monday’s losses were broad, with nine of the S&P 500’s 11 sectors down in recent trade. The energy group added its gains for the year while the utilities sector also advanced. The consumer appreciation sector led the decliners, recently dropping more than 4%.

Attention has focused on energy markets, with oil prices soaring after Secretary of State Anthony Blinken said Sunday that US and European partners They are discussing a ban on imports of Russian oil.

world standard Brent crude Topped 130 dollarsIt is the highest level since July 2008, before retreating from its highest levels. Brent crude rose 4.3 percent on Monday to $123.21 a barrel, its highest settlement value since April 2012.

Stock investors are worried that the rally Oil prices will fuel inflation And that the war in Ukraine and the ensuing sanctions on Russia could harm companies based in the United States

“Rising oil is destabilizing the market,” said Jay Hatfield, CEO and portfolio manager at Infrastructure Capital Advisors. “The market is concerned about the war and its impact on the growth of the United States and American companies.”

said Kelvin Tay, Singapore-based chief regional investment officer at

UBS.

He said that very high oil prices would be “a tax on the global economy, and therefore global growth will have to slow”.

The best-performing stocks in the S&P 500 were energy companies that will benefit from higher oil prices. shares

Schlumberger Nevada

jumped 8.8% while

Halliburton

Shares rose 6.7%.

By contrast, among the worst performing were a number of travel-related companies that could be hit by higher fuel prices and the potential for consumers to cut back on travel due to geopolitical tensions. United Airlines stock fell 15%, and

Delta Airlines

Shares are down 13%.

Occidental Petroleum

Shares fell 0.6 percent after activist investor Carl Icahn fell

out of office After years of campaigning.

bed bath behind

It rose 23% after billionaire investor Ryan Cohen revealed a 9.8% share at the retailer.

Conflicts such as the Russian invasion of Ukraine have historically lowered stock prices and boosted the value of some commodities. Deon Raboin of the Wall Street Journal explains the investor psychology that moves the markets. Photo: Justin Lane/EPA-EFE/Shutterstock

Rising commodity prices and the resulting accelerating inflation complicate the next moves of the major central banks, which were about to start tightening monetary policy before the war began.

The European Central Bank meets This week, investors will be watching for changes to growth expectations and policy. In the United States, Federal Reserve Chairman Jerome Powell

He said last week that he would A proposal to raise interest rates by a quarter of a percentage point at the Central Bank meeting later this month.

This toxic combination is a major problem for central banks. Do they tighten monetary policy and risk pushing the world into recession faster or do they allow inflation to soar higher, which will do the same? said Michael Hewson, chief market analyst at

CMC . Markets.

He added that inflation concerns are weighing on the bond market.

The yield on the benchmark 10-year US Treasury rose to 1.748% on Monday from 1.722% on Friday, reversing the trend after posting the biggest one-week drop since March 2020 last week. Yields rise when prices fall. Bonds usually work well In times of market stress or slow economic growth, but their steady cash flows lose value in periods of rapidly rising prices.

Other safe haven assets rose. Gold rose 1.5 percent to $1,93.90 an ounce, its highest settlement value since August 2020. boost the dollar, with the WSJ Dollar Index up 0.6%. The US dollar is viewed as a haven asset due to its status as the world’s reserve currency.

The Russian ruble fluctuated and was trading during the day at a record low of more than 150 rubles to 1 dollar. Russia Stock market closed And it will remain so until at least Tuesday, according to the Russian Central Bank. It has not been trading normally since February 25th.

The war in Ukraine has raised questions about the global outlook for economic growth and inflation.


Photo:

Courtney Crowe/The Associated Press

Offshore, the Stoxx Europe 600 continental index was down 1.1% on Monday. oil surge and Gas prices raise concerns Europe, an energy importer dependent on Russia, could fall into a recession.

Stock indices in the Asia-Pacific region fell sharply, with South Korea’s Kospi Composite down more than 2% and Japan’s Nikkei 225 down 2.9%, closing at its lowest level since November 2020. fell more than 3%.

Write to Karen Langley at karen.langley@wsj.com, Clarence Leong at clarence.leong@wsj.com and Anna Hertenstein at anna.hirtenstein@wsj.com

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