Dow futures jump more than 600 points as rally in commodity prices driven by Ukraine conflict eases
Stock futures posted sharp gains early Wednesday as recently surging commodity prices cooled off while the war in Ukraine continues.
Futures tied to the Dow Jones Industrial Average rose 660 points, or about 2%. S&P 500 futures climbed 2.1% and Nasdaq 100 futures gained 2.6%.
The bounce came after the market fell for a fourth day on Tuesday, with the S&P 500 and Dow falling deeper into correction territory and the Nasdaq Composite adding to its bear market losses.
The gains came amid an easing in commodity prices that have spooked the broader market. Energy and agriculture products in particular have catapulted higher amid the fighting in Ukraine, while some metals also have posted major gains.
West Texas Intermediate crude, the U.S. oil benchmark, was last down 4% to around $118, while Brent crude, the international standard, fell 3.5% to around $123.
Wheat futures also were sharply lower, falling 6.3% to $1,206 a bushel, though palladium continued its march higher, rising 3.8% to $3,082 per ounce. Silver, copper and platinum were all lower on Wednesday.
“The equity market continues to take its cues from changes in commodity prices, namely oil,” said Kathy Bostjancic, chief U.S. economist at Oxford Economics. “Trading will continue to be volatile and rally when prices retreat, but overall the prospect of oil and non-energy prices remaining very high casts a cloud overall the outlook for economic activity and the equity market.”
Certain consumer-related stocks roared back on Wednesday in premarket trading, after weakness on fears that higher gas prices would dent consumer spending. Nike rose 4% before the bell and Starbucks added 2.6%. Airlines and cruise lines were also higher in extended trading.
Treasury prices fell and yields climbed as investors rotated out of bonds after huddling in fixed income for protection amid the Ukraine war. The benchmark 10-year note rose about 3.7 basis points to 1.91%. A basis point equals 0.01%.
Bank stocks rose in premarket trading as yields rose. PNC Financial was up 5% and Wells Fargo rose more than 3%. Goldman Sachs and JPMorgan were 2% higher each.
Pepsico shares rose 1.8% in premarket trading after the soft drink giant said it will suspend sales in Russia, though it will continue to sell snacks and essentials such as baby formula. Elsewhere, shares of dating service Bumble soared nearly 23% after it reported profit and expected growth that was much better than Wall Street expectations.
The major averages all closed lower Tuesday after a day of whipsaw trading. The Dow gave up a 585-point gain to end the day lower by 184 points, falling deeper into its correction. The S&P 500 slid 0.7%, in correction territory. The Nasdaq Composite lost 0.2%, after entering bear market territory Monday.
It remains to be seen if the Federal Reserve will manage a soft economic landing, but the U.S. should be able to avoid a recession, according to Ross Mayfield, investment strategy analyst at Baird.
“The strength of the U.S. labor market, consumer and aggregate corporate sector should act as the weight to keep us out of recession near-term,” he told CNBC. “Overall, volatility is likely to persist, [there’s a] wide range of outcomes possible in Ukraine, but the fundamentals of the U.S. economy still look decent, especially if the Fed can navigate raising rates without breaking demand.”
Energy stocks were a bright spot in the market as oil prices continued to climb, jumping to their highs of the session as President Joe Biden announced a ban on Russian fossil imports, including oil, in response to the country’s invasion of Ukraine. That was after oil hit a 13-year high of $130 to start the week.
