Oil tops $110 a barrel, stocks rise after Powell comments | Business news from St. Louis

The S&P 500 was up 1% in morning trade, while Treasury yields jumped to erase some of last week’s heavy losses. Gold declined and a degree of nervousness among Wall Street equity investors eased after swinging sharply over the past few days.

Markets have spun wildly as investors, at times blindly, tried to gauge just how big the impact of two major forces will ultimately be. Most recently, Russia’s invasion of Ukraine has pushed up prices for oil and other commodities, where the region is a major producer. Added to this are concerns about what upcoming rate hikes by the Federal Reserve and other central banks around the world will mean for the economy and for inflation.

Fed Chair Jerome Powell told Congress Wednesday that he would support a quarter-point hike in his central bank’s interest rate this month. That would be the first rise since 2018, but it would also be more modest than some Wall Street investors previously feared, and gains for stocks accelerated after the comments.

Powell also said the attack on Ukraine may have had murky terms, with its impact on the US economy being “highly uncertain,” adding that “we are never on autopilot.”

The Fed is walking a tightrope, raising interest rates enough to curb the highest inflation in generations, but not enough to push the economy into recession. At the same time, higher interest rates tend to put downward pressure on stocks and most other assets.

The yield on the 10-year Treasury rose to 1.80% from 1.72% late Tuesday, while the two-year Treasury rose even more sharply to 1.47% from 1.31%. However, yields remain well below pre-Russian invasion levels. The 10-year yield was above 2% last month before falling as investors moved to what were perceived as safer assets amid war worries.

The price of US oil rose another 5.4% to $108.99 a barrel, rising as high as $112.51 in the morning, its highest level since 2014. Brent crude, the international standard, rose 5 % to $110.20 a barrel.

Rising oil prices are likely to only push inflation higher, meaning there’s a growing risk of something investors haven’t seen in a long time: an economy stagnating in the face of high inflation, known as “stagflation.” .

“The conspiracy of geopolitical uncertainty and stagflation-type stimulus is a brutal shock,” Mizuho Bank’s Tan Boon Heng said in a report.

Oil prices rose despite an agreement by the United States and other major governments in the International Energy Agency to release 60 million barrels from strategic reserves to boost supplies.

“Markets rejected the notion that 60 million barrels of released strategic reserves would be a consequence of risks of threatened Russian supplies,” Mizuho’s Tan said. “Russia is pumping more than that in just six days.”

A more impactful announcement could come later on Wednesday, when leaders from OPEC and other major oil-producing countries decide whether to increase their own production by 400,000 barrels a day.

On the stock markets, all the uncertainty has led to large fluctuations not only from day to day, but also from hour to hour. Within the first hour of trading on Wednesday, the S&P 500 rallied between gaining 0.4% and 1.2% to match its 1.5% loss the previous day.

The Dow Jones Industrial Average was up 352 points, or 1.1%, at 33,647 at 10:35 a.m. Eastern time. The Nasdaq Composite was up 0.4%.

Energy stocks led the way as they rode higher energy prices, with those in the S&P 500 up 2.1%. Bank stocks were also strong as higher longer-term interest rates can mean bigger gains for those who lend.

Ross Stores rose 6.3% after reporting stronger earnings than analysts had expected for the most recent quarter.

Ford rose 4.4% after accelerating its transformation into an electric vehicle company and splitting its EV and internal combustion engine operations into separate companies.

Stock markets around the world were mixed. France’s CAC 40 rose 1.2%, Germany’s DAX rose 0.2% and Japan’s Nikkei 225 fell 1.7%.

The Central Bank of Russia said share trading on the Moscow Stock Exchange would remain closed for a third day on Wednesday, although trading in currencies and precious metals resumed for the first time this week.

Late Tuesday, President Joe Biden announced he would join US allies in closing the country’s airspace to Russian planes, the latest in a series of sanctions and other measures aimed at isolating Russia.

But Biden also said in his annual State of the Union address that he would try to cushion Americans against the impact of higher oil prices. “I will use every tool at our disposal to protect American businesses and consumers,” Biden said.

AP business writer Joe McDonald contributed.