U.S. stocks opened lower and oil prices dropped Wednesday after major indexes rallied to start the trading week, with recent volatility in markets showing few signs of abating.
The S&P 500 declined 0.7% shortly after the opening bell. The Dow Jones Industrial Average fell 258 points, or 0.8%, and the Nasdaq Composite dropped 0.7%. U.S. stocks rallied Tuesday off their worst week since March 2020, offering investors a reprieve from a recent stretch of whipsaw trading that had sent stocks and cryptocurrencies falling.
Stocks have gyrated in recent weeks with twin fears—soaring inflation and slowing growth—hanging over markets. The S&P 500 is on track for its worst first half of the year in decades, according to Deutsche Bank research analysts.
Fed Chairman
Jerome Powell
is set to testify before Congress on both Wednesday and Thursday. Investors will be watching clues about how aggressively the central bank will raise rates to fight inflation.
Recession fears weighed on shares of energy, autos and travel companies. Occidental Petroleum declined 5.1%, while Halliburton shares declined 6.7%. United Airlines Holdings fell 1.1%.
Investors are worried that worsening economic data could precede a slowdown in U.S. growth, limiting nonessential spending. Economists surveyed by The Wall Street Journal have substantially raised the probability of recession, now putting it at 44% in the next 12 months, a level usually seen only on the brink of or during actual recessions.
“This narrative of recession is starting to lead the market,” said
Sebastien Galy,
a macro strategist at Nordea Asset Management.
Concerns for a recession have hit prices for base metals, such as copper. Copper futures on CME Group’s Comex in New York fell 3.5% to $3.90 a pound.
The Cboe Volatility Index—Wall Street’s so-called fear gauge, also known as the VIX—rose 3.4% to 31.22.
Investors sought assets viewed as safer to hold Wednesday, such as the U.S. dollar and U.S. government debt. The WSJ Dollar Index, which measures the dollar against a basket of 16 currencies, added less than 0.1%.
In bond markets, the yield on the benchmark 10-year Treasury note ticked down to 3.182% from 3.304% Tuesday. Yields fall when prices rise.
“There is certainly an anxiousness in markets and that’s playing through in volatility,” said
Edward Park,
chief investment officer at U.K. investment firm Brooks Macdonald, adding that investors are likely awaiting fresh inflation data or a central bank meeting to assess their future trades.
In energy markets, Brent crude, the international benchmark for oil prices, dropped 6.2% to $107.53 a barrel. President Biden is planning to call for a temporary suspension of the federal gasoline tax, The Wall Street Journal reported. Energy prices remain near historically high levels as Russia’s invasion of Ukraine has caused Western nations to move rapidly away from Moscow’s supplies.
“This is a reminder for markets that governments are unlikely to sit back and take a higher oil prices,” Mr. Park said.
The dollar value of bitcoin, the world’s largest cryptocurrency by market value, edged down 3.1% from its 5 p.m. ET level Tuesday to trade at $20,197.46, according to CoinDesk. Cryptocurrencies have fallen recently amid broad investor desire to get out of speculative assets and concerns about the future of some crypto companies.
Shares of cryptocurrency exchange Coinbase Global declined almost 9% in premarket trading.
U.S. stocks rallied Tuesday off their worst week since March 2020.
Photo:
Seth Wenig/Associated Press
Overseas, the pan-continental Stoxx Europe 600 declined 1.5%, with losses led by the basic resources, oil-and-gas and autos sectors.
In Asia, major indexes closed with losses. South Korea’s Kospi declined 2.7%, China’s Shanghai Composite fell 1.2% and Japan’s Nikkei 225 edged down 0.4%.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com
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