| |
Stocks Fall Friday; Oil Surges 03/06 15:35
Oil shot to its highest price since 2023 after surging again Friday because
of the Iran war, and a weak update on the U.S. job market knocked stocks lower
to cap Wall Street's worst week since October.
NEW YORK (AP) -- Oil shot to its highest price since 2023 after surging
again Friday because of the Iran war, and a weak update on the U.S. job market
knocked stocks lower to cap Wall Street's worst week since October.
The S&P 500 dropped 1.3% after a report showed U.S. employers cut more jobs
last month than they created and after oil prices spiked above $90 per barrel.
The combination of a weak economy and high inflation is a worst-case scenario
for investors because the Federal Reserve has no good tool to fix both problems
at the same time.
The Dow Jones Industrial Average plunged as many as 945 points before
finishing with a loss of 453, or 0.9%, and the Nasdaq composite sank 1.6%.
"You can't sugarcoat this report," according to Brian Jacobsen, chief
economic strategist at Annex Wealth Management. "A negative payrolls number
combined with a big jump in oil prices will have traders worrying about
stagflation risks."
Stagflation is what economists call the miserable mix of a stagnating
economy with high inflation, and a separate report released Friday added to the
sourness after showing that U.S. retailers made less money in January than
economists expected. It raised the disconcerting possibility that spending by
U.S. households, the main engine of the economy, may be stretched near its
maximum.
Usually when the economy is unsteady and the job market is weakening, the
Federal Reserve cuts interest rates to give things a boost. Lower rates can
make it easier for households to get mortgages and for companies to raise money
to expand, while also lifting prices for stocks and other investments. The Fed
cut its main interest rate several times last year and had indicated more were
to come this year.
But lower interest rates can also make inflation worse. And the Fed's hands
may be increasingly tied because spiking oil prices are pushing inflation
higher due to disruptions for the energy industry.
The price for a barrel of Brent crude, the international standard, leaped
another 8.5% to settle at $92.69. It briefly rose above $94 to touch its
highest level since September 2023.
A barrel of benchmark U.S. crude breached the $90 level for the first time
since 2023 and jumped 12.2% to $90.90.
Oil prices have surged, with Brent up from near $70 late last week, as the
war has expanded and included areas critical to the production and movement of
oil and gas in the Middle East. Much will depend on what happens with the
Strait of Hormuz off Iran's coast, where roughly a fifth of the world's oil
typically sails.
The U.S. government gave details Friday about a plan President Donald Trump
announced earlier to offer insurance to ships crossing the strait, but it had
little effect on the market.
If oil prices spike further, like to $100 per barrel, and stay there, some
analysts and investors say it could be too much for the global economy to
withstand.
To be sure, the U.S. stock market has a history of bouncing back relatively
quickly following conflicts in the Middle East and elsewhere, as long as oil
prices don't jump too high for too long. Uncertainty about just how high oil
prices will go this time around and for how long caused frenetic swings across
financial markets this past week, sometimes hour by hour.
On Monday, the S&P 500 tumbled to an immediate 1.2% loss at the start of
trading but made it all back and ended the day with a tiny gain.
Trump's most recent signal on the war was that he wants an "unconditional
surrender" of Iran, apparently ruling out negotiations.
In the bond market, Treasury yields wavered, with higher oil prices pushing
upward on them and the discouraging updates on the U.S. economy pulling
downward.
The yield on the 10-year Treasury initially rose toward 4.19% before pulling
back to 4.14%. That's up from 4.13% late Thursday and just 3.97% a week earlier.
Smaller companies often feel the bite of high borrowing costs more because
many need to borrow to grow. Smaller companies can also be more dependent on
the strength of the U.S. economy for their profits than big multinational
rivals, and the smallest stocks on Wall Street took Friday's sharpest dives.
The Russell 2000 index of small stocks fell a market-leading 2.3%.
Among the big companies in the S&P 500, companies with high fuel bills
helped lead the way lower. Old Dominion Freight Line sank 7.9%, cruise line
Carnival fell 5% and Southwest Airlines lost 5.3%.
All told, the S&P 500 fell 90.69 points to 6,740.02. The Dow Jones
Industrial Average dropped 453.19 to 47,501.55, and the Nasdaq composite sank
361.31 to 22,387.68.
In stock markets abroad, indexes slumped in Europe following a better finish
in Asia. London's FTSE 100 fell 1.2%, while Hong Kong's Hang Seng jumped 1.7%.
South Korea's Kospi was nearly unchanged after plunging 12.1% Wednesday for
its worst loss in history and then rebounding 9.6% Thursday.
|
|
