Inventories rose and oil prices fell on Tuesday, after Russia backed away from its military The confrontation over Ukrainealleviating concerns about disruptions to global energy supplies.
The S&P 500 rose about 1.2 percent, rebounding from a decline of more than 4 percent in the previous three days. Shares in Europe were also higher, with the Stoxx Europe 600 index up 1.4%.
Concerns about a potential conflict, which have been growing since Russia massed large numbers of troops on the Ukrainian border, have been more evident in energy markets. Russia is one of the world’s largest oil producers, and any conflict could disrupt global oil supplies, as well as natural gas exports through Ukrainian pipelines flowing to Europe.
Energy prices fell on Tuesday, after the Russian Defense Ministry said it would withdraw some troops from the Ukrainian border, but added that some of the military The exercises were going on. Brent crude, the international benchmark, fell more than 3 percent on Tuesday to about $93.39 a barrel. The price jumped above $96 a barrel on Monday, the highest level since 2014. Along with oil prices, energy stocks also fell.
The rising tension in Europe added to the already tense mood on Wall Street due to the rapid rise in prices and the possibility of the Federal Reserve increasing interest rates. The central bank is preparing to raise borrowing costs to combat persistent inflation, and ease the accommodative policies that have driven up the prices of risky assets such as stocks for most of the past two years. The higher-than-expected inflation readings fueled speculation that the Fed will have to raise interest rates more frequently than previously expected. The central bank is widely expected to start raising interest rates in March, at the Fed’s next policy meeting.
Government bond yields have also fluctuated in recent days. On Tuesday, the yield on the 10-year US Treasury rose five basis points, or 0.05 percentage point, to 2.04 percent.
“This is just the beginning of the Fed’s raising cycle, and investors should expect continued price volatility,” Lauren Goodwin, economist and portfolio strategist at New York Live Investments, wrote in a note. “If inflation remains too high, the Fed will have no choice but to raise faster, but it seems too soon to make a decision that it is moving in that direction.”
The two factors that investors focus on – Ukraine and inflation – are not entirely separate: Rising oil prices have been a major contributor to global inflation. Although investors got a little reprieve on Tuesday, analysts said the concerns hanging on them could continue to cause significant volatility in financial markets for the foreseeable future.
“Risk sentiment continues to be driven by news from Ukraine and Russia, and that won’t change for some time,” said Edward Moya, chief market analyst at Oanda. “Uncertainty about how aggressive the Fed will be during the next two policy meetings should keep stocks somewhat weak.”
There were other factors at play in Tuesday’s rally as well. Marriott International mentioned Its profit rose to $468 million in the three months ended December, compared to a loss of $164 million a year earlier. The company said that the Omicron variant of the coronavirus caused a temporary setback in the recovery of global demand in January, but that new bookings are rebounding to levels seen before the variant appeared.
The news lifted shares of Marriott by more than 4 percent, while other travel and entertainment companies were among the top performers in the S&P 500. Carnival Corp and Norwegian Cruise Line rose about 6 percent, and airlines also jumped. Shares of American Airlines and United each rose more than 6 percent.
Cryptocurrencies, which have been volatile for the past several months, traded higher on Tuesday, lifting shares of companies linked to the sector. Bitcoin rose about 3 percent to $4,3961.57, according to CoinDesk. Coinbase, the largest cryptocurrency exchange in the United States, rose by about 5.3 percent. HIVE Blockchain Technologies is up more than 7 percent.
“Professional web geek. Alcohol fan. Devoted zombie trailblazer. Certified social media lover. Amateur creator. Friendly food nerd.”