NEW YORK (AP) — Stocks closed lower on Tuesday after another wobbly day of trading on Wall Street as oil prices soared after the United States banned imports from Russia.
The economic fallout from his invasion of Ukraine also rattled the nickel market, driving up its price so much that trading in the metal was shut down.
The S&P 500 fell 0.7% after hovering between a 1% loss and a 1.8% gain. Such swings have become common as investors struggle to guess how high oil prices will go and how much they will weigh on the economy. The benchmark lost 30.39 points to 4,170.70. It has fallen four days in a row and now stands 13.1% below its record set at the start of this year.
Oil surged on fears that global supply could be disrupted as Russia is one of the world’s largest energy producers. Following President Joe Biden’s announcement of the Russian oil ban, the price per barrel of US crude rose 3.6% to $123.70. Brent, the international standard, rose 3.9% to $127.98.
But oil prices did not climb as high as they had the day before, when concerns erupted over a possible ban and the price of U.S. oil hit $130.50. As oil pared its gains after Biden’s announcement, stocks also pared their losses.
The surprising reactions may have been the result of the big moves markets had already made a day earlier in anticipation of the announcement, said Nate Thooft, chief investment officer of multi-asset solutions at Manulife Investment Management.
“You’ve seen the sanctions escalate, but in the eyes of the market, that’s old news,” he said. “Now that it’s happened, and a lot of selling has already taken place, the market is asking, ‘sell?’ and you have people buying in the market.”
He expects the dizzying hour-to-hour swings to continue. Uncertainty is still high and many investors are still keen to trade quickly. “For me, for the traditional investor,” he said, “it’s one of those situations where you buy into weakness and turn a blind eye.”
The Nasdaq composite fell 35.41 points, or 0.3%, to 12,795.55. On Monday, it closed 20% below its record high. The Dow Jones Industrial Average fell 184.74 points, or 0.6%, to 32,632.64. It went from a loss of 238 points to a gain of 585 earlier.
Small company stocks held up better than the broader market. The Russell 2000 rose 11.68 points, or 0.6%, to 1,963.01.
Already high oil prices have pushed the average price of a gallon of gasoline in the country to a record high. Biden said he hoped to limit Americans’ pain, but he acknowledged the ban would raise gas prices.
“Defending freedom is also going to cost us dearly,” he said.
Biden also said he understands many European allies may not be able to take similar steps because they are much more dependent on Russian energy supplies. European nations have said they plan to reduce their dependence on Russia for their energy needs, but filling the void without crippling their economies will likely take some time.
“The markets just need time to digest things and they were presumably shocked when (the invasion) happened,” said Kristina Hooper, chief global market strategist at Invesco. “It’s no surprise that the EU disagrees with the US on this, and that’s certainly positive for oil, but we also have to recognize that this is changing quite rapidly.”
The US ban on Russian oil imports is the latest move by governments and companies around the world to squeeze Russia’s finances in the wake of its attack on Ukraine. All of the penalties raise questions about how prices will go not just for oil but also for natural gas, wheat and other commodities where the region is a major producer. This in turn adds more pressure to the already high inflation that is sweeping the world, tightening its grip on the global economy.
It also makes an already difficult path for the Federal Reserve and other central banks around the world even more treacherous. They hoped to raise interest rates enough to bring down high inflation, but not enough to cause a recession.
“That geopolitical risk has essentially reduced some of the Fed’s political risk and they’re much less likely to make a policy mistake this year,” Hooper said. “The Fed recognizes this risk to US policy and will act more cautiously.”
All the uncertainty has led to a particularly wild commodity trade, where supply challenges collide with strengthening demand as the global economy recovers from its coronavirus-caused shutdown.
Nickel trading was suspended on the London Metal Exchange on Tuesday after prices doubled to an all-time high of $100,000 per metric ton.
Nickel is primarily used to produce stainless steel and some alloys, but is increasingly being used in batteries, particularly electric vehicle batteries.
Russia is the world’s third largest nickel producer. And Russian mining company Nornickel is a major supplier of high-grade nickel used in electric vehicles.
The yield on the 10-year Treasury note, which is used to fix interest rates on mortgages and many other types of loans, rose to 1.84% from 1.75% on Monday evening.
AP Business Writers Damian J. Troise, Yuri Kageyama, and Alex Veiga contributed.