The S&P 500 rebounded on Tuesday following the benchmark’s worst day since October 2020, as investors bet that selling induced by geopolitical risks has gone far enough.
The broad equity benchmark traded 0.7% higher, after its largest one-day decline in more than a year on Monday. The Nasdaq Composite rose roughly 1.2%, after falling into bear market territory in the previous session. The Dow Jones Industrial Average added about 250 points.
The major averages reversed their earlier losses as commodities’ rally slowed.
Shares of Chevron and Exxon each rose 5% and 2.5%, respectively. Plus, solar and other clean energy stocks moved higher as the continued rise in oil prices shifted focus toward alternative energy sources. Enphase Energy and SunPower added 14% and 21%, respectively.
Stocks rebounded broadly on Tuesday. There was buying in mega-cap tech with Meta Platforms 4% higher and Tesla up nearly 5%.
Airlines and cruise lines also advanced. Delta Air Lines rose 6% and American Airlines popped more than 9%. Southwest and United Airline were up 7% a piece. Norwegian Cruise Line also rose more than 7%.
Tuesday’s “bounce was a small victory that the low may be in, but it may have to be tested again either later today or later this week,” said Jim Paulsen, chief investment strategist for the Leuthold Group.
Investors continue to evaluate surging commodity prices and slowing economic growth stemming from Russia’s invasion of Ukraine. Rising prices for oil, gasoline, natural gas, and precious metals like nickel and palladium are fueling concerns about a slowdown in global growth amid surging inflation.
WTI crude oil jumped about as much as 7% to above $128 a barrel on Tuesday as President Joe Biden said the U.S. will ban Russian oil imports. Oil prices spiked to start the week with U.S. crude hitting a 13-year high of $130.
“Perhaps there’s some relief that only the US is cutting off Russian oil/gas right away while the UK and EU implement their plans over the course of several quarters. In addition, while the consensus narrative on Russia/Ukraine is quite gloomy, the ingredients for a ceasefire are falling into place,” said Adam Crisafulli, founder of Vital Knowledge.
John Kilduff, Founding Partner of Again Capital, said oil taking a second run at $130 and failing “induces some selling.”
The international benchmark, Brent crude, reached a high of $139.13 at one point overnight Sunday before settling at $123.21 per barrel, its highest since July 2008. Brent most recently was up 2% to $126.
The jump in crude is already starting to hit consumers’ wallets. The national average for a gallon of regular gas rose to $4.173 on Tuesday, according to AAA. The prior record was $4.114 from July 2008, not adjusted for inflation.
Other commodity prices also resumed their push higher. Nickel prices on Tuesday briefly touched a new record above $100,000 a metric ton.
Futures for palladium, a key metal in the manufacture of electronics, jumped another 5% to $3.04 an ounce, while platinum futures rose nearly 3% to $1,149.70 an ounce.
Treasury yields also were sharply higher, with the benchmark 10-year note up close to 10 basis points to 1.85% as investors shed bonds as inflation fears escalate. Yields move opposite price.
The market action came after a steep sell-off on Wall Street where the S&P 500 dropped nearly 3% for its worst day since October 2020. The blue-chip Dow tumbled almost 800 points for its fifth negative session in six, while the Nasdaq Composite, which contains many of the market’s biggest tech names, slid 3.6%, falling into bear market territory, down 20% from its record high from November.
Investors continued to monitor developments of escalated geopolitical tensions. Ukraine said Moscow is seeking to manipulate its cease-fire arrangement by only allowing Ukrainian civilians to evacuate to Russia and Belarus.
Shell apologized for buying cheap Russian oil and said it was divesting itself of all hydrocarbon holdings in the country. Russia itself warned that crude prices could hit $300 a barrel should Western countries enact a ban on exports. Shell shares popped 3% on Tuesday.
“There seems to be no evidence of improvements in Ukraine and the rhetoric out of D.C. continues to get more hawkish,” said Cliff Hodge, chief investment officer at Cornerstone Wealth. “While it’s impossible to know where the ultimate bottom may be, from a risk-reward standpoint, the market looks very reasonable.”
