Stocks rose and oil prices sank on Tuesday, after Russia took a step back on its military standoff over Ukraine, easing concerns over disruptions in global energy supplies.
The S&P 500 rose about 1.2 percent, rebounding from a drop of more than 4 percent in the previous three days. Stocks in Europe were also higher, with the Stoxx Europe 600 up 1.4 percent.
Concerns about a potential conflict, which have been growing since Russia amassed large numbers of troops on Ukraine’s border, have been most evident in energy markets. Russia is one of the world’s largest oil producers, and any conflict could disrupt the global oil supply, as well as natural gas exports through Ukrainian pipelines that flow to Europe.
Energy prices slid on Tuesday, after the Russian Defense Ministry said that it would withdraw some troops from Ukraine’s border, but added that some military exercises were continuing. Brent crude, the international standard, fell more than 3 percent on Tuesday, to about $93.39 a barrel. The price had climbed above $96 a barrel on Monday, its highest since 2014. Along with oil prices, shares of energy companies also tumbled.
The rising tension in Europe added to an already jittery mood on Wall Street caused by fast-rising prices and the prospect for interest rates increases by the Federal Reserve. The central bank is gearing up to raise borrowing costs to combat persistent inflation, winding down the accommodative policies that have pushed the prices of riskier assets like stocks higher for much of the last two years. Higher than expected inflation readings have fueled speculation that the Fed will have to lift interest rates more frequently than previously expected. The central bank is widely expected to start raising rates in March, at the Fed’s next policy meeting.
Government bond yields have also swung in recent days. On Tuesday, the yield on 10-year U.S. Treasury notes rose five basis points, or 0.05 percentage points, to 2.04 percent.
“This is only the beginning of a Fed hiking cycle, and investors should expect rate volatility to continue,” Lauren Goodwin, an economist and portfolio strategist at New York Life Investments, wrote in a note. “If inflation remains too high, the Fed will have little choice but to hike faster, but it seems too soon for it to have decided it is moving in that direction.”
The two factors investors are focused on — Ukraine and inflation — aren’t completely disconnected: Rising oil prices have been a major contributor to global inflation. Though investors got a small reprieve on Tuesday, analysts said the worries hanging over them could continue to result in big swings in financial markets for the foreseeable future.
“Risk appetite is still headline-driven over Ukraine and Russia news, and that won’t change for a while,” said Edward Moya, a senior market analyst at Oanda. “Uncertainty over how aggressive the Fed will be over the next couple of policy meetings should keep equities somewhat vulnerable.”
There were other factors at play in Tuesday’s rally too. Marriott International reported that its profit rose to $468 million in the three months ended in December, compared to a loss of $164 million a year earlier. The company said that the Omicron variant of the coronavirus caused a temporary setback in its global demand recovery in January, but new bookings are rebounding to levels seen before the variant’s emergence.
The news lifted Marriott’s shares by more than 4 percent, while other travel and leisure companies were among the best performers in the S&P 500. Carnival Corp. and Norwegian Cruise Line were up nearly 6 percent, and airlines also jumped. American Airlines and United each rose more than 6 percent.
Cryptocurrencies, which have remained volatile over the last several months, were trading higher on Tuesday, lifting shares of companies tied to the sector. Bitcoin rose about 3 percent to $43,961.57, according to CoinDesk. Coinbase, the largest cryptocurrency exchange in the United States, was up about 5.3 percent. HIVE Blockchain Technologies climbed more than 7 percent.