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Wall Street mixed as inflation concerns resurface, energy stocks jump

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2023-04-03T14:03:56Z

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., March 30, 2023. REUTERS/Brendan McDermid

U.S. stock indexes were mixed on Monday as rising oil prices stoked concerns about more interest rate hikes from the Federal Reserve to temper inflation, while a jump in shares of energy firms helped stem losses.

Saudi Arabia and other OPEC+ oil producers announced further output cuts of around 1.16 million barrels per day, threatening an immediate rise in prices.

This comes just days after cooling inflation raised hopes that the Fed could soon end its aggressive monetary tightening.

Major technology stocks and other growth shares such as Amazon.com Inc (AMZN.O), Microsoft Corp (MSFT.O) and Alphabet Inc (GOOGL.O) fell between 0.8% and 1.2%, pressured by higher U.S. Treasury yields.

This, coupled with a 3% fall in Tesla Inc (TSLA.O) after posting modest quarter-on-quarter sales growth, made information technology (.SPLRCT), consumer discretionary (.SPLRCD) and communication services (.SPLRCL) sectors among the biggest losers on the S&P 500.

At 9:42 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 220.42 points, or 0.66%, at 33,494.57, the S&P 500 (.SPX) was up 3.06 points, or 0.07%, at 4,112.37, and the Nasdaq Composite (.IXIC) was down 49.77 points, or 0.41%, at 12,172.14.

However, a 4.5% gain in energy major Chevron Corp (CVX.N) and a 2.7% rise in UnitedHealth Group Inc (UNH.N) helped the Dow Jones (.DJI) outshine its peers.

Shares of other energy firms such as Exxon Mobil Corp (XOM.N) and Occidental Petroleum Corp (OXY.N) were also up 4.9% and 6.0%, respectively, helping drive a 5.2% jump in the energy sector.

Bets by traders were largely tilted toward a 25-basis point rate hike in May, with odds of a pause at 39.1%, according to CME Group’s Fedwatch tool.

“We could see inflation bottom out a little bit higher than anticipated, which may mean that the Fed continues their rate hiking a lot longer and further than many currently expect,” said Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest.

U.S. stocks have weathered turbulence in the global banking sector to notch gains in the first quarter, with the S&P 500 (.SPX) jumping 7% and bouncing back from a near 20% drop in 2022.

The tech-heavy Nasdaq recorded its strongest first-quarter jump of 17% since mid-2020.

“We’ve seen the tech sector rally so hard and so far above everything else that we do expect some profit taking during the month of April,” Nolte said.

A survey from S&P Global on Monday showed manufacturing activity stayed in contractionary territory in March.

Manufacturing data from the Institute for Supply Management is due later in the day.

The quarterly earnings season is also around the corner, with companies expected to start reporting results in the next few weeks.

Among other stocks, shares of American Airlines Group Inc (AAL.O) and Delta Air Lines Inc (DAL.N) edged 0.6% and 1.3% lower on rising crude prices.

Advancing issues outnumbered decliners for a 1.50-to-1 ratio on the NYSE and a 1.03-to-1 ratio on the Nasdaq.

The S&P index recorded seven new 52-week highs and no new low, while the Nasdaq recorded 40 new highs and 28 new lows.

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