On a Tuesday in mid-March 2022, Wall Street's major indexes rose and oil slipped below one hundred dollars a barrel, as traders leaned toward a hopeful reading of a war thousands of miles away. The calm was provisional, a pause before the Federal Reserve was expected to lift interest rates for the first time in three years, a reminder that markets often trade on what they hope will happen rather than what has. Beneath the numbers lies an old human tension: the wish for peace in Ukraine set against the stubborn weight of rising prices and a new wave of illness in China.
Wall Street Rallies and Oil Falls Below $100 as Investors Brace for Fed Rate Hike
Relief rallies in a bear market
Mark
Why did stocks jump on a day before a rate hike? Usually that makes investors nervous.
Mimi
The hike is already expected, so it's priced in. What moved markets Tuesday was hope about Ukraine, and oil falling more than 6%.
Mark
Oil dropped below $100 for the first time since late February. How big a deal is that?
Mimi
It's a marker. Brent settled at $99.91 and WTI at $96.44, and both were at their lowest in almost three weeks.
Luke
Careful, though. Two different causes are in play: easing supply fears from peace hopes, and weaker demand worries from China's COVID surge. The report doesn't say which mattered more.
Mark
What did the portfolio manager mean by a relief rally in a bear market?
Mimi
Tom Plumb meant that stocks rebound on hopeful news even when the broader trend is down. The S&P 500 had lost about 2.4% in the prior three sessions.
Luke
And that's one manager's reading. The article doesn't show the hopes for Ukraine are well founded. It only says ceasefire talks continue and there are some positive signs.
Mark
What should I watch on Wednesday?
Mimi
The quarter-point hike is expected, so the pace of the bond-portfolio wind-down is the real detail.
Luke
Right. And the hike is an expectation, not a confirmed decision, until the Fed announces it.
Der Puls
- Oil plunged more than six percent, with Brent settling under $100 for the first time since late February.
- Stocks staged relief rallies led by technology shares, even as traders braced for a Fed rate hike.
- Hopes for a Ukraine ceasefire eased supply fears, while COVID surges in China threatened demand.
- All eyes are on Wednesday's Fed decision, where the pace of its bond-portfolio exit will reveal how hard the central bank will push.
- European shares dipped and the dollar softened against the euro, leaving global markets divided and uncertain.
On a Tuesday in mid-March 2022, Wall Street's major indexes rose and oil slipped below one hundred dollars a barrel, as traders leaned toward a hopeful reading of a war thousands of miles away. The calm was provisional, a pause before the Federal Reserve was expected to lift interest rates for the first time in three years, a reminder that markets often trade on what they hope will happen rather than what has. Beneath the numbers lies an old human tension: the wish for peace in Ukraine set against the stubborn weight of rising prices and a new wave of illness in China.
By the close of trading on Tuesday, all three of Wall Street's main stock indexes had climbed, and oil had dropped below $100 a barrel. The moves came a day before the Federal Reserve was expected to raise interest rates, and investors took the day's news from Ukraine as a hopeful sign.
The Dow rose 1.82%, the S&P 500 gained 2.14% and the Nasdaq added 2.92%. The rebound followed about three sessions of losses, and it was led by technology, consumer discretionary and healthcare shares. Oil moved even more sharply, with Brent falling 6.5% to $99.91 a barrel. Two forces pulled prices down: easing fears of supply disruption as peace hopes grew, and worries about weaker demand after a surge of COVID-19 cases in China.
Tom Plumb, a Wisconsin portfolio manager, called the stock gains relief rallies within a bear market. Hopes that something might resolve in Ukraine were driving sentiment, but the central question still hangs over the week.
The Fed's decision is expected to bring a quarter-point rate increase, the first in three years, as prices surge. Traders are equally focused on how quickly the central bank will wind down its bond purchases. Elsewhere the picture was mixed: European shares dipped, gold slid to a two-week low, and the dollar weakened against the euro. For now, the Ukraine talks and China's outbreak remain the forces that will decide where oil and stocks go next.
By the close of trading on Tuesday, all three of Wall Street's main stock indexes had climbed, and oil had dropped below $100 a barrel. The moves came one day before the U.S. Federal Reserve was expected to raise interest rates, and investors read the day's news from Ukraine as a hopeful sign.
The Dow Jones Industrial Average rose 1.82% to 33,544.34. The S&P 500 gained 2.14% to finish at 4,262.45, and the Nasdaq Composite added 2.92% to reach 12,948.62. The S&P 500 had lost about 2.4% over the previous three sessions, and its rebound was led by technology, consumer discretionary and healthcare shares.
Oil moved more sharply. Brent futures fell 6.5% to settle at $99.91 a barrel, and U.S. West Texas Intermediate crude dropped 6.4% to $96.44. Both contracts settled below $100 for the first time since late February, and Brent was at its lowest in almost three weeks. Two things pulled prices down: worries about supply disruption eased as hopes for peace in Ukraine grew, and a surge in COVID-19 cases in China raised concern about demand.
Tom Plumb, a portfolio manager at Plumb Balanced Fund in Wisconsin, described the stock gains as relief rallies in a bear market. He said there were hopes and expectations that something would begin to resolve in Ukraine.
The Fed's meeting is the next event. Investors expect the central bank to raise rates for the first time in three years, by at least 25 basis points, as prices surge. Plumb said the big event of the week would be the Fed discussing what to do with its portfolio and how quickly to move. In the short term, he said, the expectation is a quarter-point increase. Traders also want details on how the Fed plans to end its bond-buying program. The benchmark 10-year Treasury yield eased to 2.1544% from a session high of 2.169%, which was the highest since June 2019.
Outside the U.S., the picture was mixed. European stocks, which had been rebounding in recent sessions, dipped after China reported a jump in coronavirus cases and new restrictions. The war in Ukraine also weighed on European shares, even with ceasefire talks continuing and some positive signs of a breakthrough. The pan-European STOXX 600 lost 0.28%, while MSCI's gauge of global stocks gained 0.94%. MSCI's broadest index of Asia-Pacific shares outside Japan had closed 2.73% lower overnight.
Currencies and metals also shifted. The dollar lost value against the euro and other major currencies as oil fell and the rate hike approached. The dollar index slipped 0.043%, and the euro rose 0.04% to $1.0943. Gold, a traditional safe haven, fell to a two-week low, with spot gold down 1.8% at $1,915.48 an ounce and U.S. gold futures down 1.55% at $1,929.30.
The Fed's Wednesday decision will show how fast it intends to withdraw its bond holdings. Ukraine talks and China's COVID outbreak remain the main forces acting on oil and stocks.
Bemerkenswerte Zitate
The big event this week is the Fed discussing what to do with its portfolio and how fast it moves; the short-term expectation is a quarter-point hike.— Tom Plumb, portfolio manager, Plumb Balanced Fund
These are relief rallies in a bear market, with hopes that something will start resolving in Ukraine.— Tom Plumb, portfolio manager, Plumb Balanced Fund
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