Stocks dropped Thursday, even as the price of oil declined. President Joe Biden is releasing U.S. reserves of oil onto the market.
Dow Jones Industrial Average
closed down 550 points, or 1.6%. The
also declined 1.6%, and the
fell 1.5%. The indexes sold off in the final hour of trading.
That’s because it didn’t matter much if there was encouraging news on the economic front—the release of oil reserves. Investors still chose to lock in gains.
“You have some profit-taking from the most recent rally,” said James Ragan, director of wealth management research at D.A. Davidson & Co.
The administration’s decision to release of an average of 1 million barrels a day of oil reserves helped send the price of WTI crude oil down about 6% to $100 a barrel. That’s well below its multiyear peak of $130 hit in early March, though it’s still above the early February level of $89 just before it became clear that Russia would invade Ukraine.
And inflation, in general, is still high.
The personal consumption expenditure price index, the Federal Reserve’s preferred method of measuring inflation, rose 6.4% year over year for the month of February, above the previous result of 6%. The core personal consumption expenditure index, which does not account for food and energy prices, rose 5.4%, showing that prices rose across sectors in the economy.
Lower oil prices should be a relief to the stock market, which has already had to confront high inflation. But the indexes have experienced a run upward from their lows of the year. The S&P 500 gained 10% from its March closing low of the year to Wednesday’s close. So the stock market might have to see more than just a little drop in the price of oil to keep gaining from here.
For the broader stock market, “I don’t think the risk reward is that compelling,” said Keith Lerner, co-chief investment officer at Truist.
The S&P 500 is now under 4,600, a level that hasn’t attracted many buyers recently. Earlier this week, the index rose slightly above 4,600 before falling again. In February, the index hit just under that level twice before seeing heavy selling.
The market is sorting through a lot right now, including monetary policy changes from the Federal Reserve. The Fed is expected to lift interest rates many times within the next couple of years to combat inflation. Markets still need to assess by how much that would lower economic growth, as borrowing costs rise.
Already, consumer spending has been lower than expected. Personal spending rose 0.2% month-over-month in February, versus economists’ estimates of a 0.5% gain and lower than the prior result of 2.7%. The personal spending result wasn’t as bad is it looked on the surface, however, as the prior result was revised upward, Citi economist Andrew Hollenhorst noted.
Spending on services rose faster than the overall spending number as the spread of Covid-19 faded. Consumer service stocks gained, with the
U.S. Global Jets
exchange-traded fund (ticker: JETS), which tracks airline names, up 0.3%. Olive Garden owner
(DRI) stock rose 1%, while Outback Steakhouse owner
(BLMN) stock rose 0.7%.
Overseas, the pan-European
lost 0.9%, and Tokyo’s
ended 0.7% into the red.
Here were six stocks on the move Thursday:
(PATH) tumbled 26% after the robotic-process automation software group reported a loss in the fourth quarter that was greater than expected, while also issuing a first-quarter sales forecast below Wall Street’s estimates.
(MASI) stock fell 6.3% after the company guided for $300 million of current quarter revenue, at the midpoint of its range. That’s below analysts’ expected $328 million, and it’s because of supply shortages.
(FIVE) stock fell 1.1% even after getting upgraded to Buy from Neutral at Citigroup.
(PHM) stock dipped 5.6% after getting downgraded to Equal Weight from Overweight at Barclays.
Advanced Micro Devices
(AMD) stock fell 8% after getting downgraded to Equal Weight from Overweight at Barclays.