Wall Street returns from the Memorial Day holiday.
Angela Weiss/AFP via Getty Images
Stocks slipped on Tuesday as rising oil prices stoked renewed fears around inflation and how the Federal Reserve will rein in higher prices with tighter monetary policy.
Futures for the
Dow Jones Industrial Average
retreated 100 points, or 0.3%, after the index rallied 575 points on Friday to close at 33,312.
futures signaled a start 0.3% into the red, with the tech-stock heavy
poised to fall 0.1%.
Overseas, the pan-European
lost 0.3% and Tokyo’s
ended 0.3% lower.
Following the Memorial Day holiday, the first trading day of the week looked set to be defined by familiar concerns: multidecade high inflation and the prospect that an aggressive response from the Federal Reserve could spur a recession.
“It may have been a quieter session over the last 24 hours with the U.S. on holiday, but inflation concerns were put firmly back on the agenda thanks to another upside surprise in German inflation, as well as a further rise in oil prices,” said Jim Reid, a strategist at Deutsche Bank.
Futures for U.S. benchmark West Texas Intermediate crude surged near 4% to above $119 a barrel, up from below $110 a week ago and the highest since early March, when the Russian invasion of Ukraine plunged commodity markets into turmoil.
The announcement of a ban on most Russian crude imports by the European Union sent oil prices higher, in addition to the easing of Covid-19 lockdowns in China and factory activity recovering. Severe restrictions in Shanghai, Beijing, and other parts of China caused a slowdown in the world’s second-largest economy and have curbed oil consumption in the energy-hungry country.
“The announcement that a partial EU ban on Russian oil imports has made it over the finish line sent oil prices higher overnight. Recovering PMI data from China today, and by default recovering energy consumption, has seen the rally continue in Asia,” said Jeffrey Halley, an analyst at broker Oanda.
“The price action by oil this past week has been ominous, suggesting that supplies of refined products is getting worse, and not better,” Halley added.
Elevated energy prices are a significant force behind recent inflation—the highest in 40 years. Red-hot prices have pushed the Fed to move aggressively to raise interest rates and otherwise tighten monetary policy—a move that risks denting economic demand to the point of causing a recession.
Stocks rallied into the long weekend as investors received signs that inflation was cooling, and that the Fed may not have to clamp down on policy as hard as once thought. A continued rise in the price of oil could derail that narrative.
“Fed funds futures provided a sense that the direction of travel was similar in the U.S. to Europe, since the implied fed-funds rate by the December [Federal Open Market Committee] meeting ticked up +7 basis points,” said Reid.
Here are four stocks on the move Tuesday:
The easing of China’s Covid-19 restrictions has seen a rally in Chinese stocks—including a number of U.S.-listed Chinese tech companies.
(ticker: BABA) jumped 5% in U.S. premarket trading, with e-commerce peer
(JD) 7% higher. Electric-vehicle maker
(NIO) rallied 5%.
(UL) surged 7% in the premarket, after the consumer-products company said it appointed billionaire investor Nelson Peltz as a nonexecutive director and confirmed his TrianFund Management holds a roughly 1.5% stake in the group.
Write to Jack Denton at firstname.lastname@example.org