Stocks fall, oil prices rise as EU agrees to partially ban Russian crude


U.S. stocks fell on Tuesday, resuming their bearish trajectory after last week’s rally, while a pledge by European Union leaders to limit oil purchases from Russia lifted crude prices.

The S&P 500 fell about 0.6% in morning trade, a day after U.S. markets closed for Memorial Day. The benchmark had risen 0.6% for the month through Friday, putting it on track to stabilize after April’s 8.8% loss. The Dow Jones Industrial Average lost 0.7%, while the Nasdaq Composite Index slipped 0.6%.

Crude prices soared after EU leaders said for the first time they would impose an oil embargo on Russia following its invasion of Ukraine. The embargo would include an exemption for oil delivered from Russia via pipelines, which accounts for a third of EU oil purchases from Russia.

Brent futures, the global benchmark, rose 1.4% to $119.23 a barrel. West Texas Intermediate, the U.S. marker, rose 2.7% to $118.22 a barrel, playing catch-up after the market closed on Monday.

Tuesday’s session will cap off another volatile month of trading, in which stocks around the world swung wildly as traders tried to assess the outlook for global economies. In the United States, stocks fell shortly after the start of the month and continued to fall amid a host of worse-than-expected earnings and economic data.

Throughout the month, earnings warnings from companies ranging from Snap to Target heightened concerns about the lingering impact of inflation and prompted investors to sell stocks in several sectors.

In mid-May, it looked like the S&P 500 was set to close in a bear market, defined as a decline of 20% or more from a recent high. But a rally late in the month lifted stocks and helped the benchmark pare losses. The S&P 500 is down about 14% from its January high.

Professional and individual investors have plunged in last week’s rally in US markets, finding opportunities to buy stocks that have seen their valuations plummet. However, the issues that dragged stocks earlier this month have yet to abate.

Many traders fear that the Federal Reserve’s plans to aggressively raise interest rates could tip the US economy into a recession. Meanwhile, concerns about an economic slowdown in China and long-lasting supply chain disruptions from the pandemic and war in Ukraine continued to weigh on investors’ minds.

“There’s a bit of uncertainty in the market about the fairly quick recovery we’ve had,” said Edward Park, chief investment officer of Brooks Macdonald, “and whether that can be sustained in a world where the inflation is clearly still a factor.”

European Union leaders took a big step in the economic fight against Moscow following its invasion of Ukraine by agreeing to block 90% of Russian oil imports by the end of the year. The embargo has faced opposition from countries heavily dependent on Russian crude, particularly Hungary. Photo: Olivier Matthys/Associated Press

New survey data released on Tuesday showed that U.S. consumer confidence fell slightly in May compared with previous months. President Biden is also expected to meet with Fed Chairman Jerome Powell on Tuesday at the White House.

Ten of 11 S&P 500 sectors were down on Tuesday. Energy was an exception, due to rising oil prices. Marathon Oil and Diamondback Energy both jumped more than 3%.

Shares of Unilever traded in the United States jumped 8.5% after the consumer goods company announced that it would add activist investor Nelson Peltz to its board of directors and revealed that its fund held now a 1.5% stake.

The S&P 500 energy sector is on track to end May with the largest gain among the benchmark’s 11 groups, continuing a trend that has thrived for much of 2022. But even some battered tech stocks are expected to end the month in the green, such as Netflix and Zoom Video Communications.

“When the S&P 500 is [close to entering] a bear market, which has a significant psychological impact on those looking for value,” said Craig Erlam, senior market analyst at Oanda. “I think the question that’s been asked repeatedly is, ‘Are we seeing a bottom in the markets?’”

In the bond market, the yield on 10-year Treasury bills rose to 2.862% from 2.748% on Friday. Yields and bond prices move in opposite directions.

Overseas, the pancontinental Stoxx Europe 600 index fell 0.7%, putting it on track to snap a four-game winning streak, after eurozone inflation rose faster than expected. . Consumer prices rose 8.1% year on year in May – the fastest past since records began in 1997 – after climbing at a rate of 7.4% in April. The inflation report will likely factor into the European Central Bank’s upcoming interest rate decisions. Earlier this month, ECB President Christine Lagarde indicated that the central bank could raise its key rate in July for the first time in 11 years.

Traders worked on the floor of the New York Stock Exchange on Friday.


Photo:

Courtney Crow/Zuma Press

In Asia, the Shanghai Composite Index rose 1.2% after the city government said a two-month lockdown would be lifted on Wednesday. The shutdown, designed to limit the transmission of Covid-19, had slowed China’s economy and added to inflationary pressures elsewhere in the world by gumming up supply chains.

Hong Kong’s Hang Seng rose 1.4%. The Japanese Nikkei 225 fell 0.3%

Write to Caitlin McCabe at caitlin.mccabe@wsj.com and Joe Wallace at joe.wallace@wsj.com

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