Stock futures crept higher, while bond yields and oil prices rose, a day after recession fears pushed the Dow Jones Industrial Average into a correction.
Futures for the S&P 500 rose 0.2% on Tuesday, while futures for the Dow Jones Industrial Average rose 0.1%. Futures related to the high-tech Nasdaq-1000 are unchanged. Overseas, the Stoxx Europe 600 rose 0.2%, driven primarily by the financial and utilities sectors.
Brent oil, the international oil benchmark, continues to rise on fears of a US ban on Russian oil imports. Brent crude, the international oil benchmark, rose more than 3% to $127.26 a barrel.
Investors are scrambling to analyze the possible wider implications of a Russian invasion of Ukraine and a tougher Western response. Market volatility jumped as relations between the West and Russia hit a new low, while soaring commodity prices increased the likelihood that global growth could be hit and clouded the outlook for central banks seeking to tame inflation by raising interest rates.
The benchmark 10-year US Treasury yield rose to 1.844% on Tuesday from 1.748% on Monday. Bond yields and prices move in opposite directions.
“Investors are increasingly concerned about the impact of rising commodity prices,” Sima Shah, chief strategist at Principal Global Investors, said of rising bond yields. “While there is still an element of the asylum trade, it is being stifled by concerns about inflation.”
Gold added 0.8% to $2011.70 a troy ounce, approaching a record closing level.
On Monday, the Dow Jones entered corrective territory for the first time in two years, the Nasdaq Composite fell into bear market, and the S&P 500 suffered its worst one-day drop in about a year and a half.
“I would say that the market is in a state of shock. Given the tectonic shift we are seeing, everyone is questioning what the end game could be,” said Brian O’Reilly, head of market strategy at Mediolanum International Funds.
The Dow Jones Industrial Average closed in correction territory on Monday for the first time in two years.
Photo: Courtney Crowe/Zuma Press
The impact was most significant in commodity markets due to Russia’s oversized role as a resource producer. The prices of oil, natural gas and key commodities such as metals and grains have risen sharply, putting pressure on businesses and households already feeling the effects of rapidly rising inflation. Concern that the US may be ready to ban Russian oil imports has led to a surge in oil prices, raising fears of a recession.
“Not every recession has been caused by a surge in oil prices, but every surge in oil prices has caused a recession,” Mr. O’Reilly said. “This is likely to be a protracted affair and have a sustainable impact on commodity prices.”
Investors are awaiting data on the US trade deficit due at 8:30 am ET. Economists are expecting another record monthly trade deficit in January as consumers spend more and inflation pushed prices higher.
In Asia, stock markets fell after moves on Wall Street on Monday. Japan’s Nikkei 225 fell 1.7% and Hong Kong’s Hang Seng fell 1.4% to its lowest level since 2016.
Since Russia invaded Ukraine in late February, the US and its allies have imposed tough sanctions on Russia. Shelby Holliday of the WSJ details how these sanctions affect everyone from President Vladimir Putin to ordinary Russian citizens. Photo: Pavel Golovkin/Associated Press
Email Will Horner at [email protected]
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