U.S. stocks wobble as oil erases loss, S&P 500 heads for 2nd straight weekly gain

By William Watts and Barbara Kollmeyer

U.S. stocks wobbled, turning modestly lower Friday as oil prices rebounded following reports of a missile strike on a Saudi Aramco facility.

However, the S&P 500 index and Nasdaq Composite remained on track for their second straight weekly gains, largely shaking off worries around the Russia-Ukraine war and increasingly hawkish commentary from Federal Reserve officials.

How are stocks trading?

On Thursday, the Dow Jones Industrial Averagerose nearly 350 points, or 1%, while the S&P 500 gained 1.4% and the Nasdaq Composite climbed 1.9%.

What’s driving markets?

Stocks lost ground near midday Friday, with the S&P 500 and Dow erasing modest gains after oil futures turned higher following news reports that a missile strike had caused an explosion and fire at a Saudi Aramco facility in Jeddah. Yemen’s Iran-backed Houthi rebels have claimed credit for past strikes on Saudi facilities.

The S&P 500 index was heading for a weekly rise of 1.2%, while the Nasdaq was looking at a gain of around 1.3%; the Dow was fractionally lower for the week. That performance has come against a backdrop of the war in Ukraine that has been raging for more than a month as well as expectations for a more aggressive Federal Reserve.

“Investor bias remains toward larger safer stocks with the biggest, Apple (AAPL), on a 15% run-up off the recent bottom and the Dow more stable than indexes with smaller companies,” said Louis Navellier, founder and chief investment officer at Navellier & Associates, in a note.

“The focus going forward will be with companies demonstrating pricing power in the next round of earnings as inflation and resulting higher interest rates will remain the biggest concern,” he said.

Gains for stocks came as a selloff in Treasurys gained momentum, sending yields, which move the opposite direction of prices, on 2- and 10-year notes to their highest since May 2019. Analysts said headlines suggesting Russia might settle for less than full control of Ukraine triggered pressure on safe-haven assets, while Citigroup (C) in a note Friday saw the Fed raising interest rates in four straight half percentage point moves and then hiking into 2023, sending the benchmark rate to a range of 3.5% to 3.75%.

The moves in stocks and bonds came as investors and economists pencil in more aggressive rate increases by the Federal Reserve after Chairman Jerome Powell earlier this week said the central bank could lift rates by more than 25 basis points, or a quarter of a percentage point, in future meetings, while some policy makers have argued for half-point increases.

New York Fed President John Williams on Friday said he would support a half-point move if justified but indicated it was premature to make a call on the size of a future rate increase.

“There has not been much positive news to report, and yet the S&P 500 has rallied back 6%, led by the highest beta and most speculative parts of the market. I’m not sure what that tells you other than your typical active investors are probably sidelined,” said Stephen Innes, managing partner at SPI Asset Management, in a note to clients.

In addition to the backdrop of war that has exacerbated an energy crisis, investors also are weighing slowing China economic growth and a Federal Reserve determined to stamp out inflation.

“China internet and meme stock baskets are both up 20 %, while profitless tech baskets are up nearly 15 % and 30 % off the lows last week. And when Bitcoin is the best performing macro asset, you know Twitter is in control,” he said.

In U.S. economic data Friday, the final reading of the University of Michigan’s consumer sentiment in March fell slightly to 59.4 and stayed at a nearly 11-year low because of high inflation and angst about the Russian invasion of Ukraine. Pending home sales slid 4.1% in February, according to the monthly index released by the National Association of Realtors, the lowest level in nearly two years.

Elsewhere, the European Council and European Parliament reached a provisional agreement on a Digital Markets Act, aimed at tech giants such as Google parent Alphabet Inc. (GOOGL), Apple, and Facebook parent Meta Platforms (FB).

-William Watts

What companies are in focus?

Other assets

 

(END) Dow Jones Newswires

03-25-22 1230ET

Copyright (c) 2022 Dow Jones & Company, Inc.

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