Stocks and oil prices fell on Thursday as President Biden prepared for a major release of oil reserves to tackle energy prices and inflation.
The S&P 500 was down 0.1% after falling 0.6% on Wednesday. The Nasdaq Composite Index fell 0.1% and the Dow Jones Industrial Average fell 0.3%.
President Biden is expected to use 180 million barrels of government oil reserves over the next six months to deal with rising energy prices after Russia’s invasion of Ukraine, the White House said on Thursday.
That would be the largest release of strategic stocks in history, according to RBC Capital Markets. Global benchmark Crude Brent fell 3.4% to $ 107.65 a barrel.
Shares are set to collect a volatile first quarter on a mixed note. The S&P 500 rebounded in recent days, up 5% this month, but the broad index continues to fall 3.6% so far this quarter.
In recent days, investors have managed to stay calm in the face of the ongoing crisis in Russia and Ukraine, without even considering the new Covid-19 blockade in China. Instead, they are focusing on lowering oil prices in an effort to ease inflation.
“It simply came to our notice then. For markets, this means less inflation and less pressure for central banks to be aggressive with rising interest rates, ”said James Athey, Abrdn’s investment manager..
“It’s about relief, potentially removing a destabilizing element” caused by high oil prices.
The U.S. and its allies have sought to lower prices with strategic reserves in advance, but the consequences have usually been short-lived. Members of the International Energy Agency agreed to release 60 million barrels on March 1, but gross Brent prices rose more than 7% that day.
The yield on the benchmark 10-year Treasury bill fell to 2.345%. 2,357%, extending the three-day fall to the fourth day. Yields fall as prices rise. European government debt also rose, with Germany’s 10-year yield falling below 0.6%.
Government bonds typically perform poorly in times of high inflation because the value of their fixed cash flows is eroded by rising prices. The 10-year Treasury yield is on track to make the biggest jump in the quarter since 1994.
Bond sales have stabilized in recent days, most likely over time, according to investors. At the end of the quarter, large asset managers typically balance their portfolios.
Taking a closer look at part of the U.S. yield curve, the gap between two-year yields and 10-year yields fell to 0.02 percentage points on Thursday from about 0.9 percentage points in early January. If negative, the yield curve would be reversed.
“For us, that would be an indicator of a recession, but I don’t think it’s time to panic yet,” said Arun Saik, a multi-asset strategist at Pictet Asset Management. “We are on the threshold of a significant signal, but things can be turned upside down anyway.”
US consumer spending rose 0.2% in February, driven in part by high prices, but was below expectations. Unemployment claims, proxies for layoffs, reached 202,000. This is a moderate rise from the previous week, which was the lowest level since 1969, but still in line with economists’ expectations among the tight labor market.
Among individual stocks, the Walgreens Boots Alliance fell 6.3% above analysts ’expectations after making a profit, but said it also had to incur higher costs in some parts of its business. Software developer UiPath fell 19% after releasing higher-than-expected quarterly losses.
Abroad, the Stoxx Europe 600 pan-continental fell 0.7%.
Shares in Russia rose 5.6% and the ruble strengthened 0.9% against the dollar. The currency was trading at around $ 83 rubles, approaching the pre-invasion level of 81.
In Asia, most major benchmarks declined. The Shanghai Composite Index fell 0.4% and the Hong Kong Hang Seng Index fell 1.1%. Weaker-than-expected data from surveys of purchasing managers in China in March have weighed on sentiment, investors said.
-Gunjan Banerji contributed to this article.
Write to Anna Hirtensteini at email@example.com
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Shares Slip as US Eyes Reserve Release
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