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The stock market’s losses accelerated Wednesday afternoon, with the Dow plunging nearly 400 points.
Increased sanctions on Russia and military efforts from allied nations haven’t helped.
The
Dow Jones Industrial Average
was down 367 points, or 1.1%, in afternoon trading. The other indexes didn’t look much better. The
S&P 500
dropped 1% and the Nasdaq Composite fell 1.1%.
Investors are trying to size up a number of risks, including the Russia-Ukraine war. NATO will send more troops to its eastern flank in response to Russia’s ongoing aggression, the alliance’s secretary-general said Wednesday. And the White House it is preparing to sanction members of Russia’s lower house of parliament. President Joe Biden and NATO allies are expected to announce more sanctions on Russia when they meet in Brussels this week.
“There’s not enough money on the sidelines that’s going to confidently come in at this stage of geopolitical risk,” said Edward Moya, senior market analyst at Oanda. “You’re probably looking at a market here that has become overly optimistic.”
Indeed, the market’s dip comes after stocks rallied on Tuesday, bringing the major indexes to impressive gains from their recent lows. The S&P 500, heading into the open on Wednesday, was up more than 8% from its March 8 closing low of the year. The buying has come even as the Federal Reserve has made clear it will lift interest rates many times in the next couple of years to fight inflation. That has sent the 2-year Treasury yield up to 2.12% from 1.87% just before the Fed laid out its projected rate-hiking path last week. Higher rates would drag economic growth lower, perhaps into recession.
“The big question now is whether all this prospective Fed tightening will push the economy into recession or whether policymakers can achieve the much sought-after ‘soft landing’ that avoids one,” wrote Deutsche Bank strategist Jim Reid.
Another big question, and one of the most pressing fears, is further sanctions on Russian commodities, which would restrict global supplies and lift prices, creating even more burdensome inflation for consumers. The Bloomberg Commodity Index is up 30% for the year, though it’s down from its March 8 peak, a welcome sight for stock investors.
West Texas Intermediate crude oil, also down from its multiyear peak hit in early March, was up 1.7% to $113 a barrel.
“You can’t ignore the move in oil prices,” Moya said. “It looks like we’re going be leading up to an eventual EU threat of a ban on Russian energy at some point.”
And as if the broader stock market’s movement wasn’t telling enough, airline stocks were signaling that the higher oil price is a concern. Fuel is a big chunk of operating costs for airlines, so higher oil prices pressure profit margins for those companies. The
U.S. Global Jets exchange-traded fund
(JETS) dropped 1.4%.
Here are some stocks on the move Wednesday:
GameStop
(GME) had gained 13% Wednesday after Chairman Ryan Cohen snapped up 100,000 more shares in the meme stock, taking his holding up to 11.9%.
Adobe
(ADBE) had fallen 10% after the software company reported better-than-expected earnings but provided an outlook for the current quarter that fell short of Wall Street estimates.
Tesla
(TSLA) dipped 0.1%. The stock jumped 7.9% on Tuesday after the electric-vehicle giant opened its first European car factory in Germany.
T-Mobile US
(TMUS) stock was flat — much better than the broader market — after getting upgraded to Overweight from Sector Weight at KeyBanc Capital Markets.
BP PLC
(BP) stock rose 3.2% after getting upgraded to Overweight from Equal Weight at Morgan Stanley.
Write to Joe Woelfel at joseph.woelfel@barrons.com
Read More: Stocks Lose Even More Ground. Russia, Oil Prices Aren’t Helping.