Stocks rose and oil prices sank on Tuesday, after Russia took a step back on its military standoff over Ukraine, easing concerns over disruptions in global energy supplies.
The S&P 500 rose 1.6 percent, rebounding from a drop of 4 percent in the previous three days. Stocks in Europe were also higher, with the Stoxx Europe 600 up 1.4 percent.
Concerns about a potential conflict, which have been growing since Russia amassed troops on Ukraine’s border, have been most evident in energy markets. Russia is one of the world’s largest oil producers, and any conflict could disrupt the global oil supply as well as natural gas exports through Ukrainian pipelines that flow to Europe.
Energy prices slid on Tuesday, after the Russian Defense Ministry said it would withdraw some troops from Ukraine’s border but added that some military exercises were continuing. Brent crude, the international standard, fell more than 3 percent on Tuesday, to above $93 a barrel. The price had climbed above $96 on Monday, its highest since 2014. Along with oil prices, shares of energy companies tumbled.
The rising tension in Europe added to an already jittery mood on Wall Street caused by fast-rising prices and the prospect for interest rates increases by the Federal Reserve. The central bank is gearing up to raise borrowing costs to combat persistent inflation, winding down the accommodative policies that have pushed the prices of riskier assets like stocks higher for much of the last two years. Higher-than-expected inflation readings have fueled speculation that the Fed will have to lift interest rates more frequently than previously forecast. The central bank is widely expected to start raising rates in March, at the Fed’s next policy meeting.
Government bond yields have also swung in recent days. On Tuesday, the yield on 10-year U.S. Treasury notes rose six basis points, or 0.06 percentage points, to 2.05 percent.
“This is only the beginning of a Fed hiking cycle, and investors should expect rate volatility to continue,” Lauren Goodwin, an economist and portfolio strategist at New York Life Investments, wrote in a note. “If inflation remains too high, the Fed will have little choice but to hike faster, but it seems too soon for it to have decided it is moving in that direction.”
The two factors investors are focused on — Ukraine and inflation — aren’t completely disconnected: Rising oil prices have been a major contributor to global inflation. Though investors got a small reprieve on Tuesday, analysts said the worries hanging over them could continue to result in big swings in financial markets for the foreseeable future.
“Risk appetite is still headline-driven over Ukraine and Russia news, and that won’t change for a while,” said Edward Moya, a senior market analyst at OANDA. “Uncertainty over how aggressive the Fed will be over the next couple of policy meetings should keep equities somewhat vulnerable.”
Other factors were at play in Tuesday’s rally, too. Marriott International reported that its profit rose to $468 million in the three months that ended in December, compared with a loss of $164 million a year earlier. The company said that the Omicron variant of the coronavirus caused a temporary setback in its global demand recovery in January, but that new bookings were rebounding to levels seen before the variant’s emergence.
The news lifted Marriott’s shares by 5.8 percent, while other travel and leisure companies were among the best performers in the S&P 500. Carnival and Norwegian Cruise Line were up more than 6 percent, American Airlines rose 8.1 percent, and United climbed 7.6 percent.
Cryptocurrencies, which have remained volatile over the last several months, were trading higher on Tuesday, lifting shares of companies tied to the sector. Bitcoin rose about 4.7 percent to $44,177.04, according to CoinDesk. Coinbase, the largest cryptocurrency exchange in the United States, rose 7 percent. HIVE Blockchain Technologies climbed 10.5 percent.
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