Market Decline Linked to Rising Oil Prices
NEW YORK (AP) — Stock markets faced a downturn on Friday as escalating oil prices dashed hopes for potential interest rate cuts from the Federal Reserve this year.
S&P 500 Falls for Fourth Consecutive Week
The S&P 500 fell by 1.5%, marking its fourth successive week of losses—its longest losing streak in a year. The Dow Jones Industrial Average declined by 443 points (1%), while the Nasdaq composite dropped by 2%.
Impact of Oil Prices and Bond Yields
Market losses intensified as oil prices reversed an initial decline and gained momentum in the afternoon. Brent crude, the global benchmark, surged by 3.3% to reach $112.19 per barrel, while U.S. crude increased by 2.3% to $98.32 per barrel. The stock market also struggled due to rising yields in the bond market, which increase the costs of mortgages and other loans for households and businesses, thereby slowing economic growth.
Traders’ Concerns About Future Rate Cuts
Traders have significantly reduced their expectations for interest rate cuts from the Fed this year, with some speculating that rates might even increase in 2026—a scenario that was unimaginable prior to the onset of the war with Iran.
Future of Interest Rates and Inflation
Ann Miletti, head of equity investments at Allspring Global Investments, remarked that a rate hike would be impactful. However, prolonged high oil prices could also hinder the economy, leading the Fed to forgo raising rates. Lower rates could bolster the economy and stimulate investment, although they might worsen inflation concerns.
Stock Performance and Notable Losers
The U.S. stock market traditionally recovers from conflicts, provided that high oil prices do not persist for too long. Recently, Super Micro Computer’s stock plummeted by 33.3% after the U.S. government accused a senior vice president of the company of participating in a scheme to smuggle advanced computer chips to China.
Global Market Reactions
In the broader market, around 75% of stocks in the S&P 500 dropped. The bond market experienced notable shifts as well, with the yield on the 10-year Treasury rising to 4.38%. Additionally, international stock indexes saw significant declines, especially in Europe, while South Korea’s Kospi managed a slight gain of 0.3%.
