S&P 500 plunges after worst sell-off since 2020, Nasdaq plunges deeper into bear market

The S&P 500 moved lower on Tuesday, after the benchmark’s worst day since October 2020, as investors remained on edge about rising commodity prices and slowing economic growth following the Russian invasion of Ukraine.

The S&P 500 was down 0.6% after its biggest one-day drop in more than a year on Monday. The Nasdaq Composite fell 0.9% and fell further into bear market territory. The Dow Jones Industrial Average fell about 150 points.

Rising prices for oil, gasoline, natural gas and precious metals such as nickel and palladium are fueling concerns about a slowdown in global growth. Coupled with rising inflation, investors may face a risk-free period.

“Russia-Ukraine conflict, commodity price spikes, inflation concerns and a highly uncertain Fed outlook”
have caused recession fears to build rapidly and stock markets have sold off strongly,” Chris Senyek, chief investment strategist at Wolfe Research, said in a note.

WTI crude rose about 4% to nearly $124 a barrel on Tuesday, after NBC News reported the US will ban Russian oil from Tuesday.

Oil prices spiked to start the week, with US crude hitting its 13-year high of $130.

The international benchmark, Brent oil, peaked at $139.13 on Sunday at some point overnight before hitting $123.21 a barrel, the highest since July 2008. Brent recently rose 3.4% up to $127.36.

The jump in crude oil is already starting to hit consumers’ wallets. The national average for a gallon of regular gas rose to $4,173 Tuesday, according to AAA. The previous record was $4,114 from July 2008, not adjusted for inflation.

Shares of Chevron and Exxon rose 2.6% and 2.5% respectively. In addition, shares of solar and other clean energy soared as the continued rise in oil prices shifted focus to alternative energy sources. Enphase Energy and SunPower added 3.9% and 6.8%, respectively.

Other commodity prices also resume their upward pressure. The nickel price briefly hit a new all-time high of over $100,000 a ton on Tuesday.

Futures for palladium, a major metal in electronics manufacturing, rose another 5% to $3.04 an ounce, while platinum futures were up nearly 3% to $1,149.70 an ounce.

Government bond yields were also sharply higher, with the 10-year benchmark rising nearly 10 basis points to 1.85% as investors divest their bonds as inflation fears escalated. Yields move opposite to the price.

The market action came after a strong sell-off on Wall Street, where the S&P 500 fell nearly 3% for its worst day since October 2020. The blue-chip Dow fell nearly 800 points for its fifth negative session in six, while the Nasdaq Composite, which containing many of the biggest tech names on the market, fell 3.6% and fell into bear market territory, down 20% from its November record high.

Investors continued to monitor developments in mounting geopolitical tensions. Ukraine said Moscow wants to manipulate its ceasefire by allowing only Ukrainian citizens to evacuate to Russia and Belarus.

Shell apologized for buying cheap Russian oil and said it was shedding itself all of the country’s hydrocarbon resources. Russia itself warned that the price of crude oil could reach $300 a barrel if Western countries introduce an export ban. Shell shares rose 3% on Tuesday.

“There appears to be no evidence of improvements in Ukraine and DC rhetoric is becoming increasingly aggressive,” said Cliff Hodge, chief investment officer at Cornerstone Wealth. “While it’s impossible to know where the ultimate bottom might be, the market looks very reasonable from a risk and reward perspective.”