Stock futures sank Monday morning and oil prices soared as investors nervously considered the potential for even higher inflation and greater global economic damage from Russia’s war in Ukraine and sanctions that have ensued.
Contracts on the S&P 500, Dow and Nasdaq dropped more than 1% at session lows in early trading amid the risk-off mood. Traders piled into safe haven assets, and gold prices (GC=F) briefly jumped above $2,000 per ounce for the first time since September 2020. US Treasury yields advanced.
In energy markets, Brent crude oil prices (BZ=F), the international standard, soared to as much as $137 per barrel, building on gains over the past several weeks. US West Texas intermediate crude oil (CL=F), likewise, rose to as much as $130.50 a barrel.
The jump in energy prices came as the White House and European nations weighed an import ban on Russian crude oil in a further punitive move for the country’s invasion of Ukraine. Secretary of State Antony Blinked told CNN on Sunday that the Biden Administration was “now talking to our European partners and allies to look in a coordinated way at the prospect of banning the import of Russian oil,” while ensuring global markets remain sufficiently supplied.
The US receives only a small portion of energy products from Russia, with just 7% of total petroleum imports including crude oil coming from the country in 2020, according to the Energy Information Administration. However, such a ban could more negatively impact European countries that have been more reliant on Russian crude oil as well as natural gas for energy. Prices for metals used in fuel cell batteries and other clean energy products including palladium and nickel also spiked on Monday as traders eyed an accelerated move toward renewable alternatives.
“Russia’s invasion of Ukraine—and the Western response to it—will exacerbate the supply-demand imbalance that lies at the heart of the global inflation surge,” Goldman Sachs economist Jan Hatzius wrote in a note Sunday. “Reducing trade with a current account surplus country via sanctions and boycotts means that the rest of the world needs to produce a larger share of what it consumes.”
Hatzius added that “the potential shift is fairly small at an aggregate level,” given Russia comprised less than 2% of the global goods trade and gross domestic product. But in oil, Russia supplies 11% of global consumption, and 17% of natural gas — including as much as 40% of Western European consumption.
“If Western countries buy less Russian oil, China and India could in principle buy more Russian oil and correspondingly less Saudi and other oil, which can then flow to the West,” Hatzius added. “But this ‘rearrangement of the deck chairs’ isn’t perfect, not only because of increased transport costs and other technical frictions but also because China and India may be reluctant to increase their imports and corresponding payments sharply at a time when Russia is becoming a global pariah.”
The uncertainty over global trade and supplies of key goods has further stoked fears over a further surge in inflation. Later this week, the Bureau of Labor Statistics is set to release its February Consumer Price Index, which economists expect will show a 7.9% annual rise for the largest jump since 1982. And given the latest set of commodity price increases this month, a further rise is also possible.
“We had thought that February was going to mark the peak,” Michelle Girard, NatWest co-head of global economics, told Yahoo Finance Live on Friday. “However, with the rise in energy prices that we’re seeing, I don’t think we can any longer assume that’s going to be the case. Certainly, with respect to the headline numbers, I think, it’s likely that we’ll continue to see upward pressure.”
8:19 am ET: Bed Bath & Beyond shares soar by more than 90% after activist Ryan Cohen discloses nearly 10% stake
Ryan Cohen’s investment firm RC Ventures disclosed a 9.8% stake in Bed Bath & Beyond (BBBY) on Monday, sending shares of the retailer soaring by more than 90% in pre-market trading.
Cohen, the co-founder of Chewy and chairman of GameStop, also wrote a letter to the board of Bed Bath & Beyond calling for a sweeping set of operational changes and for the board to consider alternatives including a full sale of the company. Cohen was also critical of the compensation of its top executives even as the company experienced share price declines and market share losses.
7:40 am ET Monday: Stocks head for a sharply lower open
Here’s where stocks were trading Monday morning:
S&P 500 futures (ES=F): -47.75 points (-1.10%) to 4,279.50
Dow futures (YM=F): -365.00 points (-1.09%) to 33,218.00
Nasdaq futures (NQ=F): -177.5 points (-1.28%) to 13,662.25
Raw (CL=F): +$7.66 (+6.62%) to $123.34 a barrel
Gold (GC=F): +$25.40 (+1.29%) to $1,992.00 per ounce
10-year Treasury (^TNX): +5.5 bps to yield 1.777%
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter
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