Wall Street’s main indexes fell sharply on Monday, with the Nasdaq Composite confirming it was in a bear market, as the prospect of a ban on oil imports from Russia sent crude prices soaring and fueled concerns about rising inflation. The S&P 500 fell 2.95%, its biggest decline in 16 months, closing at its lowest level since June 2021.
The Nasdaq ended down 20.1% from its Nov. 19 record high close, confirming the tech-heavy index has been in a bear market since hitting that record high, according to a widely used definition. That marks the Nasdaq’s first bear market since 2020, when the coronavirus outbreak crushed global economies.
The Dow Jones Industrial Average ended down 10.8% from its Jan. 4 closing record high, confirming it was in a correction. A correction is confirmed when an index closes 10% or more below its record closing level.
A rally in energy and materials stocks amid the surge in oil and other commodity prices sheltered the TSX from the bulk of the selloff.
Oil prices jumped to their highest levels since 2008 as the United States and European allies considered banning Russian oil imports, in response to the country’s invasion of Ukraine, while it looked less likely that Iranian crude would return swiftly to global markets.
Russia calls the campaign a “special operation.”
Energy, the standout S&P 500 group so far this year, was one of the only sectors logging a gain on Monday on Wall Street, rising 1.6%.
“That concern on oil has led to concerns on higher inflation and potential for stagflation,” said Mona Mahajan, senior investment strategist at Edward Jones. “I think there is just a broader concern that there may be a hit to growth from the consumer given higher prices at the pump.”
The Toronto Stock Exchange’s S&P/TSX composite index ended down 98.03 points, or 0.5%, at 21,304.40, after giving back some earlier gains.
“Markets are attractive at these levels if you have a long enough time horizon to weigh out the global uncertainty,” said Kevin Headland, co-chief investment strategist at Manulife Investment Management.
“There is still a risk of these oil price pressures translating into demand destruction and hurting economic growth.”
The price of oil spiked to US$130.50 a barrel before settling up 3.2% at $119.40 a barrel.
Canada’s energy sector gained nearly 3%, reaching its highest level in five years, while the materials group, which includes precious and base metals miners and fertilizer companies, added 1.5%.
Gold rose 1.5% to US$1,997.61 per ounce.
Together, the energy and materials sectors have a 27% weighting on the Toronto market.
Among sectors that lost ground was consumer discretionary, which ended 3.3% lower as auto parts makers fell.
Heavily-weighted financials lost 1.6% and industrials were down nearly 1%. It included a 16.5% decline for Cargojet Inc as the air cargo services company reported quarterly results.
The Dow Jones Industrial Average fell 797.42 points, or 2.37%, to 32,817.38, the S&P 500 lost 127.79 points to 4,201.08 and the Nasdaq Composite dropped 482.48 points, or 3.62%, to 12,830.96.
Amazon, Microsoft and Apple were among the top individual drags on the S&P 500 while the financials sector fell 3.7%. The utilities sector , one of the defensive areas of the stock market, gained 1.3%.
Ukrainian officials said a bread factory had been hit by a Russian air strike as the country’s negotiators assembled for talks with Russian officials after previous rounds that brought no respite in the conflict.
Shares of United Airlines Holdings Inc fell 15% and Norwegian Cruise Line Holdings dropped 11.6%, among a broad downswing in travel and leisure stocks as the jump in oil prices threatened to disrupt a nascent recovery.
Air Canada shares fell 10.5% in Toronto.
Stocks have struggled to start 2022 as concerns about the Russia-Ukraine crisis have deepened a sell-off initially fueled by worries over higher bond yields as the Federal Reserve is expected to tighten monetary policy this year to fight inflation.
“The market was already nervous about a Fed rate hike cycle,” said Burns McKinney, portfolio manager at NFJ Investment Group. “Now when you layer on higher energy prices on top of that... that has the investment community increasingly concerned that we may end up quickly moving toward the late stages of the market cycle.”
Investors are waiting for a U.S. consumer prices report on Thursday, with the Fed widely expected to hike rates later this month to combat surging inflation.
Declining issues outnumbered advancing ones on the NYSE by a 3.62-to-1 ratio; on Nasdaq, a 2.74-to-1 ratio favored decliners. The S&P 500 posted 50 new 52-week highs and 69 new lows; the Nasdaq Composite recorded 63 new highs and 546 new lows. About 17 billion shares changed hands in U.S. exchanges, compared with the roughly 13 billion daily average over the last 20 sessions.
The yield on 10-year Treasury notes was up 3.6 basis points to 1.758% after falling to 1.668%, its lowest since Jan. 5.
There was violent moves elsewhere in commodities Monday.
Palladium bounded 15% higher to an all-time peak of $3,440 an ounce on fears of shortages of the metal used by automakers in catalytic converters, since Russia accounts for 40% of global production. Later it shed much of the gains.
Industrial metals also lurched higher, led by nickel, which surged 76% to a 15-year peak of $51,000 a tonne as global supply chains tried to price in the possible absence of supplies from Russia, the third largest nickel producer.
At one point, it gave up $6,500 of the gains in less than half an hour, but then rebounded.
Russia accounts for 10% of global nickel supply and 6% of the world’s aluminum output.
Both copper and aluminum touched record peaks, but later turned tail and went into the red.
On agricultural markets, Chicago wheat futures rose more than 7%, hitting a 14-year top as traders worried about the impact the Ukraine conflict is having on supplies from Russia, the world’s biggest wheat exporter, and Ukraine.
With Ukrainian ports closed and operators reluctant to trade Russian wheat in the face of Western financial sanctions, buyers are trying to find alternative suppliers.
Russia and Ukraine together account for about 29% of global wheat exports and 19% of corn exports.
Reuters, Globe staff
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