The Dow Industrials affirmed that it was in a correction, as the ban on oil imports from Russia sent crude prices soaring and fueled concerns about rising inflation, as the main indexes of Wall Street fell sharply on Monday.
The Dow Jones Industrial Average was down over 10% from its Jan. 4 closing record high. If an index falls 10% or more below its record closing level, a correction is made.
Since 2008, oil prices have jumped to their highest levels 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 quickly to global markets. Energy shares, the standout S&P 500 group so far this year, was one of the few sectors that have logged a gain on Monday.
Mona Mahajan, senior investment strategist at Edward Jones, said that the concern on oil has led to concerns on higher inflation and potential for stagflation. There is a concern that there may be a hit to growth from the consumer given higher prices at the pump. According to preliminary data, the S&P 500 lost 128.65 points, or 2.97%, to end at 4,200. The Nasdaq Composite lost 476.76 points, or 3.58%, to 12,836, while the Nasdaq Composite lost 476.76 points, or 3.58%, to 22 points. The Dow Jones Industrial Average fell 795.24 points, or 2.37%, to 32,819. Amazon, Microsoft and Apple were among the top single drags on the S&P 500, while the financials sector fell sharply. One of the defensive areas of the stock market was the utilities sector.
Ukrainian officials said that a bread factory had been hit by a Russian air strike after the country's negotiators assembled for talks with Russian officials after previous rounds that brought no respite in the conflict. There were declines in shares of Norwegian Cruise Line Holdings and United Airlines Holdings as the jump in oil prices threatened to disrupt a nascent recovery.
Concerns over the Russia-Ukraine crisis have caused a sell-off initially fueled by concerns over higher bond yields, as the Federal ReserveFederal Reserve is expected to tighten monetary policy this year to fight inflation.
Burns McKinney, portfolio manager at NFJ Investment Group, said the market was already nervous about a Fed rate hike cycle. Now add on higher energy prices and you have a higher energy price. The investment community is worried that we may end up in the late stages of the market cycle. The Fed is expected to hike rates later this month in order to combat rising inflation, and investors are waiting for a U.S. consumer prices report on Thursday.