NEW YORK (AP) – Stock markets around the world were mixed Monday as a jump in oil prices threatens to increase upward pressure on inflation.
The S&P 500 gained 15.20 points, or 0.4%, to 4,124.51, although more stocks on the index fell than rose. The Dow Jones Industrial Average rose 327.00, or 1%, to 33,601.15, while the Nasdaq composite fell 32.45, or 0.3%, to 12,189.45.
Oil fell 6.3% with Saudi Arabia and other crude producing countries said over the weekend to kill production. Stocks of industrial companies rose, including a 5.9% rise for Exxon Mobil, a 9.9% jump for Marathon Oil and a 4.3% gain for BP.
While the oil boom is helping industry producers, it’s also putting pressure on many other markets. In addition to raising gasoline prices and other costs for everyone, there are also dents in one of the main themes that have helped rise in stocks in the first quarter of this year: the turmoil in the banking system and the continued slowdown in inflation that pushed the Federal Reserve to ease its pace. hikes to interest rates.
H has already jacked up rates at a feverish pace over the last year in hopes of experiencing high growth. Higher rates may help slow down the economy, but they risk a recession later.
They also fetch prices for stocks, bonds, and other things. This is a factor that helped cause the second-biggest US bank failure in history last month, which in turn signaled a tougher scrutiny of banks around the world. There is a fear that the unsustainable reliance of the industry could lead to a lending trap, which would further hurt the economy.
There was hope on Wall Street that the rate hike and cuts could happen this year. Such cuts released some of the pressure on the economy, which was still growing thanks to strong trade performance, but showed pain in the market and in other corners.
Cuts to rates also tend to act like steroids for financial markets. U.S. stocks are expected to return to an average of 8% in the three months following the peak of the U.S. federal funds rate, according to Goldman Sachs. That includes six instances going back to 1982.
As a result, so much furor has built up among traders as to how much more Hed will raise rates. On Friday, they were slightly tilted to the H, holding steady at their next meeting in May, which would be the first time in more than a year that rates did not hike.
But following Monday’s breakout for oil prices, bets built that rates would hike by another quarter-point in May, according to the CME Group.
The short-term Treasury is initially giving such expectations, though more relaxed following the release of a disappointing report on the US economy. U.S. manufacturing activity weakened more than economists expected in the month, it showed.
March marked its fifth straight month of contraction and shows the stinging effects of past hikes have already worked their way through the system. After this report, two-year Treasury yields fell to 3.97% from 4.04% late Friday. It was up 4.11% early in the morning.
It got its initial push higher from the rally in oil prices. A barrel of US crude oil jumped $4.75 to settle at $80.42 after oil producers said over the weekend they would cut production from May until the end of the year.
Less supply of oil will raise the price, as long as demand remains stable.
Brent crude, the international benchmark, rose $5.04 to $84.93 a barrel. It’s roughly back to where it was a month ago, though it’s still well below where it was in March 2022, when it hit $130 a barrel after Russia’s incursion into Ukraine raised concerns about energy supplies.
“This will both create political waves across Europe and even higher general inflation in the USA, leading to renewed pressure on the Fed to keep rates hiking aggressively,” Clifford Bennett, chief economist at ACY Securities, said in a report.
Higher interest rates hurt all types of stocks, but high growth companies tend to hit the hardest. That puts extra pressure on Big Tech stocks that have an effect on the S&P 500 and other indexes due to their sheer size.
In the first half, he hopes that the easing of interest will mean that Big Tech stocks have been among the main reasons for the gains in the S&P 500. Strategists at Morgan Stanley, led by Michael Wilson, are skeptical that they will hold up better than others as the market continues. still down, as they hope.
“We see little evidence that a new bull market has begun and that the bear still has an unfinished business,” Wilson wrote in the report.
Amazon was one of the heaviest weights on Monday’s list after it slipped 0.9%.
Tesla fell 6.1% after it said over the weekend that delivery in the first three months of the year fell short of analysts’ expectations, although they were still on record.
In overseas markets, stock indexes across Europe and Asia were mixed.
AP Business Writer Elaine Kurtenbach contributed.