Stocks ended lower Wednesday, while oil prices resumed their recent march higher and the dollar held gains against its global peers, as investors awaited news of fresh sanctions on Russia while side-stepping one of the biggest bond market sell-offs on record.
The Dow Jones Industrial Average fell 448 points, 1.29%, to 34,358, while the S&P 500, which is down 6% for the year, fell 1.23%. The tech-focused Nasdaq Composite retreated 1.32%.
President Joe Biden flew to Brussels for a meeting with NATO leaders in the Belgian capital Thursday, with reports suggesting he's prepared unveil new sanctions on Moscow, possibly in the energy sector, in response to its month-long invasion of Ukraine.
As fighting continues in the southern city of Mariupol, United Nations observers estimate that nearly 1,000 civilians have died in the conflict, which has been deemed a 'special operation' by President Vladimir Putin, while peace talks are said to be moving forward only on a "step-by-step" basis, according to Ukrainian President Volodymyr Zelenskyy.
The extended fighting, as well as talk of new sanctions on Russian crude exports, lifted oil prices back over the $115 mark in overnight trading, with gains capped by a firmer U.S. dollar.
Brent crude futures contracts for May delivery, the global pricing benchmark, were last seen $5.88 higher on the session at $121.40 per barrel.
WTI futures for the same month, which are more closely tied to U.S. gasoline prices, jumped $5.19 from Tuesday's close to change hands at $114.50 per barrel.
Markets were also closely tracking moves in the bond market, which is deep in the throes of its largest peak-to-trough decline on record amid hawkish signals from the Federal Reserve and yet another generationally-high reading on inflation -- this time in the United Kingdom, where CPI hit 6.2% -- from a major global economy.
Benchmark 10-year note yields were little-changed from last night's close at 2.293%, while the U.S. dollar index was marked 0.15% higher against a basket of its global peers at 98.64.
Federal Reserve President Jerome Powell spoke at the Bank for International Settlements' "Innovation Summit" Wednesday as investors absorb a torrent of comment from policymakers suggesting the need for faster near-term rate hikes.
Powell, who insisted Monday that the U.S. economy was resilient enough to withstand a series of Fed Funds increases as the central bank tamps down the fastest inflation in 40 years, will be followed by appearances from San Francisco Fed President Mary Daly and St. Louis Fed President James Bullard, both of whom have suggested that a 50 basis point rate hike may be necessary in the face of a domestic inflation rate that is hovering near 8%.
"US stocks declined as the harsh reality sets in that the Fed most likely won’t be able to navigate a soft landing as geopolitical risks will continue to keep upward pressures on prices and force the Fed into a difficult decision later this year," Edward Moya, senior market analyst for the Americas with Oanda, said.
Moya added that "the Fed will either have to tighten policy so much that it sends the economy into a recession, or it will once again have to flip flop and prevent policy from becoming too restrictive."
"Wall Street's resilience for risky assets can't handle a flip-flopping Fed and that seems to be what some traders are expecting," he said.
Market reaction to the Fed's hawkish tilt has been swift: the CME Group's FedWatch tool is pricing in a 63% chance of back-to-back half-point hikes at the Fed's May and June meetings, while benchmark 2-year note yields -- which have risen more than 1.4% so far this year -- are holding at 2.17%, putting the gap between 10-year paper at just 20 basis points.
GameStop (GME) shares were the most active stock in early trading, rising more than 15.5% after an investment group lead by chairman Ryan Cohen unveiled a purchase of around 100,000 shares in the money-losing video game retailer.
Adobe Inc (ADBE) shares, meanwhile, moved 9.34% lower after the world's third-largest cloud software group forecast weaker-than-expected current quarter profits that offset a solid March quarter update.
