Stocks rebound after oil prices fall 6%

NEW YORK — Tech companies led stocks higher on Wall Street on Tuesday as oil prices fell sharply on the second day and inflation concerns eased. The market rally came a day before the highly anticipated Federal Reserve interest rate policy update.

The S&P 500 rose 2.1%, ending a three-day losing streak, after a report showed rapidly accelerating inflation came to a halt at the wholesale level last month. The Dow Jones industrial average rose 1.8% and the technology-heavy Nasdaq composite rose 2.9%.

The wildest action has been in Asian oil and stock markets, where tougher anti-covid measures in China are raising concerns about energy demand and disruptions to global manufacturing and trade. Oil prices fell more than 6%, easing some pressure on inflation. A barrel of US crude fell below $97 after starting the week above $109. Shares in Hong Kong fell more than 5% for a second straight day after the neighboring city of Shenzhen was ordered to shut down.

Cautious optimism regarding the latest round of talks between Russia and Ukraine may have helped put traders in a buying mood. Ukrainian presidential aide Ihor Zhovkva said the video discussions held by representatives of the two nations on Tuesday were “more constructive”, noting that Russia has stopped broadcasting its demands for Ukraine’s surrender.

“If ever so light, at least there’s still growing optimism about Ukraine, combined with optimism about inflation, oil in particular, and optimism that the Fed won’t be more hawkish than what’s already integrated into the market,” said Sam Stovall, Chief Investment Officer. strategist at CFRA.

The S&P 500 rose 89.34 points to 4,262.45. The Dow gained 599.10 points to 33,544.34 and the Nasdaq rose 367.40 points to 12,948.62.

Small company stocks also gained ground. The Russell 2000 Index rose 27.25 points, or 1.4%, to 1,968.97.

The Fed has started a two-day meeting on interest rates, and it is expected to announce a 0.25 percentage point hike in its short-term policy rate on Wednesday. It would be the first increase since 2018, pulling it off its all-time high of near zero, and likely the first in a series of rate hikes. The Fed is trying to slow the economy enough to stem the high inflation that is sweeping the country, but not enough to trigger a recession.

Inflation is at its highest level in generations, and the most recent figures do not include the spike in oil prices that occurred after Russia invaded Ukraine.

Data released on Tuesday showed that inflation was still very high at the wholesale level last month, but at least it has not accelerated. Producer prices rose 10% in February from a year earlier, the same rate as in January. Month-on-month inflation rose 0.8% in February from January, versus 0.9% expected. That’s a slowdown from monthly inflation of 1.2% in January.

Treasury yields fell immediately after the reports, then edged higher in the afternoon. The 10-year Treasury yield rose to 2.15% from 2.14% Monday night. The two-year yield, which moves more on expectations of Fed policy changes, fell to 1.86% from 1.87%.

Falling oil prices also contributed to lower yields. A barrel of US crude fell 6.4% to $96.44. It had risen above $130 last week when concerns about supply disruptions due to the war in Ukraine were at their height. Brent, the international standard, fell 6.5% to $99.91 a barrel.

A reprieve from fuel prices helped a wide variety of stocks, and the majority of S&P 500 companies were up. Airlines led the way after several raised their revenue forecasts this quarter. American Airlines, Delta Air Lines and United Airlines all climbed 8% or more.

Tech and other high-growth stocks also recouped some of their earlier losses as Treasury yields fell. Higher interest rates may hurt these stocks more than others, as they are considered more expensive relative to their earnings.

FILE – American flags fly in front of the New York Stock Exchange, Friday, Jan. 14, 2022, in New York’s Financial District. Stocks soar on Wall Street on Tuesday, March 15, as inflation worries ease and oil prices fall (AP Photo/Mary Altaffer, File)
Photo In this photo provided by the New York Stock Exchange, trader Craig Spector works the floor, Tuesday, March 15, 2022. Stocks rallied on Wall Street on Tuesday as oil prices fell sharply for a second day and concerns on inflation have fallen. (Courtney Crow/New York Stock Exchange via AP)
Photo In this photo provided by the New York Stock Exchange, trader Tim Sela, left, works on the floor, Tuesday, March 15, 2022. Stocks rallied on Wall Street on Tuesday as oil prices fell sharply for a second day and inflation concerns have waned. (Courtney Crow/New York Stock Exchange via AP)
Photo In this photo provided by the New York Stock Exchange, trader Michael Urkonis works the floor, Tuesday, March 15, 2022. Stocks rallied on Wall Street on Tuesday as oil prices fell sharply for a second day and concerns on inflation have fallen. (Courtney Crow/New York Stock Exchange via AP)

Steve R. Hansen