By noon, the Dow Jones Industrial Average had plunged by 1.7% or 564 points, at 33,050, while the Nasdaq Composite and the S&P 500 both shed 1.8%
12.05pm: Dow loses 500 points
US stocks continued to drop on Monday as plans to impose sanctions against Russian oil imports amid the raging war between Russia and Ukraine sent crude prices soaring again.
By noon, the Dow Jones Industrial Average had plunged by 1.7% or 564 points to 33,050, while the Nasdaq Composite and the S&P 500 both shed 1.8%.
“The theme of falling equity prices and rising commodity prices remains with us, providing a continued bearish theme, with the prospect of sanctions on Russian oil exports coming into view,” noted Chris Beauchamp, chief market analyst at online trading platform IG.
Beauchamp said that the Sunday night gap in crude prices was an open invitation for sellers to get involved, but now the gap has been closed. “Unless and until the talk of sanctions on Russian oil and gas stops, oil will continue to rise.”
“Ultimately this could be what halts the inflationary rise in the long term, especially when combined with the rise in other commodities such as food prices,” Beauchamp said. “But for now, consumers face a tricky task, as do central banks.”
As the Russia-Ukraine conflict entered a 12th day, shares of airlines, travel agencies, and cruise lines tumbled on rising fuel costs. In addition, shares of consumer stocks such as Starbucks, McDonald’s, and Nike also dropped,
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10.00am: Stocks plunge at the open
US stocks opened with losses Monday as investors worried about soaring oil prices and the ongoing war between Russia and Ukraine.
In New York, The Dow Jones Industrial Average lost over 300 points, or 1% at 33,278, while the broader S&P 500 shed 0.9% and the tech-laden Nasdaq Composite was down by 0.6%.
Global markets plunged as the US signaled plans to impose a ban on imported Russian oil, followed by Europe suggesting similar actions.
“The initial reports sent oil prices soaring, with Brent crude almost touching $140 a barrel on the open, which in turn sent equity markets spiraling lower,” said Craig Erlam, senior market analyst, UK and EMEA, OANDA.
He noted that it’s this kind of event risk that investors fear each Friday as they trigger enormous knee-jerk reactions at the open, and big gaps which are usually exacerbated compared to what would be seen during the week.
“The risks remain firmly tilted to the upside as far as oil prices are concerned,” Erlam said. “Downside risks primarily focus around Ukraine and Russia finding common ground and based on the current demands, that does not look likely any time soon.”
Even a nuclear deal would only provide partial relief compared to Russian supply disruptions and that isn’t even progressing as hoped, he added.
Bank stocks were the biggest losers Monday at the open, including Citigroup Inc which shed 3.3%.
Meanwhile, shares of Bed, Bath & beyond surged more than 60% higher at the open after Gamestop chairman Ryan Cohen said that he has a 10% stake in the company via his investment firm RC Ventures.
6.30am: Markets to open lower
US stocks look set for an opening drop as global markets plunged on Monday amid surging energy prices on the threat of a potential ban on Russian oil imports which investors worry could impact economic growth as the conflict in Ukraine intensifies.
Futures for the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 fell by between 1.4% and 1.6%. The Dow last week recorded its fourth straight week of losses.
The war in Ukraine following Russia’s invasion of the country is now in its 12th day and has increased tensions between Moscow and the West, leading to Russia being locked out of much of the global financial system.
Oil prices soared again, with global benchmark Brent crude topping $130 a barrel at one stage on Monday, the highest level since July 2008. The US and its European partners are discussing a ban on imports of Russian oil, US Secretary of State Antony Blinken said Sunday.
Surging oil and gas prices are spurring concerns that Europe, an energy importer dependent on Russia, could fall into recession.
Higher commodity prices and the resulting accelerated inflation are also complicating the next moves of major central banks, who were largely set to begin tightening monetary policy before the war began.
The European Central Bank is meeting this week, and investors will be watching for changes to its growth outlook and what this could mean for policy.
Michael Hewson, chief markets analyst at CMC Markets commented: “It’s hard to see much in the way of significant upside for stock markets now against a backdrop of continued escalation.”
“This toxic cocktail poses a huge problem for central banks. Do they tighten monetary policy and risk pushing the world into a recession even quicker or do they allow inflation to rip higher, which would do the same thing?” Hewson added.