U.S. equities plummet overnight in corrective territory as rising oil prices exacerbate inflation worries

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U.S. stock index futures were mixed but fluctuated overnight as the Dow Jones Industrial Average fell nearly 800 points on Monday and closed in a correction as higher oil prices fueled concerns about inflation and economic growth.

The rise in oil prices above $130 a barrel on Monday was driven by the possibility that the US could ban crude oil imports from Russia. Oil prices stabilized late in the day and were moderately higher early Tuesday.

The third round of peace talks between Ukraine and Russia did not produce serious results. A senior Ukrainian official said little, unspecified progress has been made in establishing safe corridors to allow civilians to escape the fighting.

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But Russian troops continued shelling as Ukraine ran out of food, water, heat and medicine.

Rising prices for oil and other vital commodities are shaking global markets and the situation remains uncertain as investors seek shelter from the expansion of sanctions against Russia.

U.S. stock index futures were mixed but fluctuated overnight as the Dow Jones Industrial Average fell nearly 800 points on Monday and closed in a correction as higher oil prices fueled concerns about inflation and economic growth. (Courtney Crow/NYSE via AP/Associated Press)

Analysts expect war in Ukraine to be on the agenda for some time to come, and say the full impact of the conflict has not yet been taken into account.

“Energy market disruptions and the possibility of a geopolitical paradigm shift are creating a highly unpredictable environment,” Stephen Innes of SPI Asset Management said in a comment. However, he added, “we need to get to the point where stocks start going up like a light at the end of a tunnel.”

On Wall Street on Monday, the S&P 500 dropped 122.78 points to 4201.09. The Dow Jones Industrial Average fell 2.4% to 32,817.38.

The Nasdaq Technology Composite Index fell 3.6% to 12,830.96, down 20.1% from the record set in November. This means that the index is in what Wall Street calls a bear market. The S&P 500 fell 12.4% from its peak in early January.

Gold, a measure of Wall Street’s nervousness, also rose, although not as much as when oil prices peaked. The price of gold briefly reached $2007.50 an ounce. By Tuesday afternoon it was $1995.88, down 0.1%.

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US benchmark oil rose $2.67 to $122.07 a barrel in electronic trading on the New York Mercantile Exchange. It settled at $119.40 a barrel on Monday, up 3.2% from hitting $130.50 earlier. Brent crude, the international pricing standard, rose $3.75 to $126.96 a barrel. It settled at $123.21 a barrel, up 4.3% from hitting $139 earlier.

Fears are growing that a Russian invasion of Ukraine will disrupt already meager oil supplies. Russia is one of the world’s largest energy producers and oil prices were already high before the attack because the global economy is demanding more fuel after the coronavirus shutdown.

A US ban on imports of Russian oil and other energy products, if passed, would be an important step for the US government, although the White House has said it hopes to limit disruptions in oil markets and curb price spikes at gas stations.

Reports also say that US officials may consider easing sanctions against Venezuela. This could potentially free up more crude and ease fears of cuts in supplies from Russia. (Courtney Crow/NYSE via AP)

Reports also say that US officials may consider easing sanctions against Venezuela. This could potentially free up more crude and ease fears of cuts in supplies from Russia.

A gallon of regular gasoline is already averaging $4,065 nationwide after breaking the $4 barrier on Sunday for the first time since 2008. A gallon cost an average of $3,441 a month ago, according to AAA.

The war is putting additional pressure on central banks around the world as the US Federal Reserve intends to raise interest rates later this month for the first time since 2018. Higher rates are slowing down the economy, which we hope will help curb high inflation. But if the Fed raises rates too quickly, it risks plunging the economy into recession.

“Their response to geopolitics cannot be measured, so there is uncertainty,” said Samir Samana, senior global markets strategist at the Wells Fargo investment institute.

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In addition to the sanctions imposed by governments on Russia due to its invasion of Ukraine, companies also impose their own sanctions. The list of companies leaving Russia has expanded to include Mastercard, Visa and American Express, as well as Netflix.

On Wall Street, shares of Bed Bath & Beyond rose 34.2% to $21.71 after billionaire Ryan Cohen’s investment firm bought nearly 10% of the company and recommended big changes. Cohen is the co-founder of Chewy, and he built up a cult following after acquiring a stake in GameStop, the struggling video game chain that eventually named him chairman of the board.

Meanwhile, stocks in Asia fell on Tuesday.

Benchmarks were lower in Tokyo, Sydney, Hong Kong, Seoul and Shanghai after the S&P 500 fell 3%.

Japan’s benchmark Nikkei 225 shed 1.7% in afternoon trading at 24,783.70. The Australian S&P/ASX 200 fell 0.8% to 6980.30. South Korean Kospi fell 0.8% to 2631.49 points. The Hong Kong Hang Seng shed 0.5% to hit 20,956.39 and the Shanghai Composite shed 1.2% to hit 3333.49.

Treasury yields rose, with 10-year bonds rising to 1.78% from 1.72% at the end of Friday.

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In foreign exchange trading, the US dollar rose to 115.48 Japanese yen from 115.32 yen. The euro was worth $1.0865, down from $1.0853.

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AP Business correspondents Stan Chow and Alex Veiga contributed.