Photo: Maxim Hopman
US stocks plunged to conclude the first quarter—its worst quarterly downturn over the past two years as worries about the crisis in Ukraine continue to mount and its impact on the economy and the response of the Federal Reserve.
Earlier this week, the hope of potential peace negotiation between Ukraine and Russia pushed the stocks up. Then, however, the optimism died down as Russian President Vladimir Putin warned on Thursday to stop the trade in Europe with a third of its gas except if the payment is in ruble as Ukraine gets ready for more assault.
Meanwhile, US counterpart Joe Biden rolled out the biggest release from the country’s emergency oil reserve and encouraged oil firms to increase drilling in an attempt to reduce gasoline prices that had surged at the outset of the war in Ukraine.
Stock prices have been incredibly reliant on any indication of headway toward a peace deal between Ukraine and Russia. As a result, already-elevated US inflation has increased with soaring product prices like oil and metals after the war broke out.
With the prices going higher day by day, the Fed becomes more insistent on increasing interest rates to counter inflation, prospectively repressing economic growth.
Thursday’s data displayed customer prices hardly increased in February as pricing tension escalated, with personal consumption expenditures (PCE) except food and energy soaring by 0.4%, aligned to expectations.
“The PCE number came out today, which is the Fed’s preferred number, and although that was right on target, it was higher than it was last month, and the sense is it is going to continue to go higher; therefore, you are seeing some weakness,” stated managing partner at Kace Capital Advisors in Boca Raton, Florida, Ken Polcari.
“This only solidifies (Fed Chair) Jay Powell and the Fed’s position to be more aggressive, so there are going to be multiple 50 basis point hikes.”
The Dow Jones Industrial Average dropped 550.46 points, or 1.56%, to 34,678.35, the S&P fell 72.04 points, or 1.57%, to 4,530.41, and the Nasdaq Composite lost 221.76 points, or 1.54%, to 14,220.52.
