Overnight, U.S. stocks fell across the board, and rising oil prices sparked market concerns.
The Dow fell 269.24 points, or 0.81%, to 32,910.90, while the S&P 500 lost 1.08% to end at 4,115.77. The Nasdaq fell 0.73% to close at 12,086.27.
Investors on Wednesday continued to look for signs of slowing economic growth ahead of Friday’s release of the consumer price index (CPI) for May. The data is expected to be slightly lower than April’s figure and may indicate that inflation has peaked.
Meanwhile, the bond market has little hope for investors as the 10-year U.S. Treasury yield crosses the 3% mark. International oil prices also hit a 13-week high, with U.S. West Texas Intermediate crude rising 2.26% to close at $122.11 a barrel.
Ten of the 11 S&P sectors ended lower, dragged down by the real estate sector. Meanwhile, the energy sector closed at its highest level since 2014. The 10-year yield on U.S. Treasuries climbed to 3.029%.
Shares of Intel fell more than 5 percent in regular trading on Wednesday, dragging down the 30 Dow components after the company warned of weak semiconductor demand. Fundstrat’s Tom Lee said the odds of a soft landing are rising, with stocks pricing in an “almost full recession”.
“I think there will be a series of rate hikes, but it’s actually the Fed taking a more hawkish-than-expected stance that worries the market,” he said.
CNBC’s Jim Cramer explains why the surge in oil prices has Wall Street worried about a recession, noting that oil stocks fell on Wednesday even as crude hit all-time highs .
“As long as oil prices continue to climb, it’s hard to have a case for a soft landing. Oil prices are a nightmare for the Fed. It’s having an impact across the economy and nothing seems to stop it,” he added. , the probability of a recession will also increase.”
Energy stocks in the S&P 500 rallied slightly on Wednesday, but only a handful rose, even as oil prices hit a 13-week high.
“I don’t believe in stagflation theory,” Cramer said. Stagflation refers to a slowing economy with high inflation and unemployment. “Ideally, we could get more supply from U.S. producers and get rid of energy inflation.”
Cramer said that if prices continue to climb, that could lead to a drop in demand, which in turn could lead to a recession, as consumers in general cut back on spending, which could spell trouble for the economy and policymakers.
“Even if we don’t get more supply, the price of oil will eventually drop because of the demand destruction. But if we do, we could have a painful, long, hot summer,” he added.
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