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Stocks rally after oil prices slide 6%

by The Associated Press | March 16, 2022 at 2:32 a.m.
In this photo provided by the New York Stock Exchange, traders work on the floor, Tuesday, March 15, 2022. Stocks are rallying on Wall Street Tuesday as oil prices slid sharply for a second day and inflation worries ebbed. (Courtney Crow/New York Stock Exchange via AP)

NEW YORK -- Technology companies led stocks broadly higher on Wall Street Tuesday, as oil prices slid sharply for the second day and inflation worries ebbed. The market rally came a day ahead of the Federal Reserve's highly anticipated interest rate policy update.

The S&P 500 rose 2.1%, ending a three-day losing streak, after a report showed inflation's rapid acceleration paused at the wholesale level last month. The Dow Jones industrial average rose 1.8% and the tech-heavy Nasdaq composite rose 2.9%.

The wilder action was in oil and Asian stock markets, where tightened anti-covid measures in China are raising worries about demand for energy and about disruptions to manufacturing and global trade. Oil prices tumbled more than 6%, taking some pressure off inflation. A barrel of U.S. crude fell below $97 after starting the week above $109. Stocks in Hong Kong sank more than 5% for a second straight day after the neighboring city of Shenzhen was ordered into a shutdown.

Some cautious optimism about the latest round of talks between Russia and Ukraine may have helped put traders in a buying mood. Ukrainian presidential aide Ihor Zhovkva said discussions via video held by representatives of the two nations Tuesday were "more constructive," noting that Russia has stopped airing its demands for Ukraine to surrender.

"If ever so slight, at least there's still building optimism regarding Ukraine, combined with optimism regarding inflation, oil in particular, and optimism that the Fed will not be more hawkish than is already built into the market," said Sam Stovall, chief investment strategist at CFRA.

The S&P 500 rose 89.34 points to 4,262.45. The Dow gained 599.10 points to 33,544.34, and the Nasdaq rose 367.40 points to 12,948.62.

Smaller company stocks also gained ground. The Russell 2000 index rose 27.25 points, or 1.4%, to 1,968.97.

The Fed began a two-day meeting on interest rates, and the wide expectation is that it will announce on Wednesday an increase of 0.25 percentage points to its key short-term rate. That would be the first increase since 2018, pulling it off its record low of nearly zero, and likely the first in a series of rate hikes. The Fed is trying to slow the economy enough to tamp down the high inflation sweeping the country, but not so much as to trigger a recession.

Inflation is at its highest level in generations, and the most recent numbers don't include the surge in oil prices that occurred after Russia invaded Ukraine.

Data released Tuesday showed inflation was still very high at the wholesale level last month, but at least it wasn't accelerating. Producer prices were 10% higher in February from a year earlier, the same rate as in January. On a month-to-month basis, inflation rose 0.8% in February from January, versus forecasts for 0.9%. That's a slowdown from January's 1.2% month-over-month inflation.

Treasury yields dipped immediately after the reports, then edged higher by afternoon. The yield on the 10-year Treasury rose to 2.15% from 2.14% late Monday. The two-year yield, which moves more on expectations for Fed policy changes, fell to 1.86% from 1.87%.

Also helping to pull down yields were the tumbling oil prices. A barrel of U.S. crude dropped 6.4% to settle at $96.44. It had topped $130 last week when worries about disruptions to supplies because of the war in Ukraine were at their height. Brent crude, the international standard, fell 6.5% to settle at $99.91 per barrel.

A reprieve on fuel prices helped a wide variety of stocks, and the majority of companies in the S&P 500 were rising. Airlines led the way after several raised their forecasts for revenue this quarter. American Airlines, Delta Air Lines and United Airlines all soared 8% or more.

Tech and other high-growth stocks also recovered some of their earlier losses as Treasury yields fell. Higher interest rates can hurt such stocks more than others because they're seen as more expensive relative to their earnings.

  photo  FILE - American flags fly outside the New York Stock exchange, Friday, Jan. 14, 2022, in the Financial District in New York. Stocks are climbing on Wall Street Tuesday, March 15, as inflation worries ebb and oil prices slide(AP Photo/Mary Altaffer, File)
 
 
  photo  In this photo provided by the New York Stock Exchange, trader Craig Spector works on the floor, Tuesday, March 15, 2022. Stocks are rallying on Wall Street Tuesday as oil prices slid sharply for a second day and inflation worries ebbed. (Courtney Crow/New York Stock Exchange via AP)
 
 
  photo  In this photo provided by the New York Stock Exchange, trader Tim Sela, left, works on the floor, Tuesday, March 15, 2022. Stocks are rallying on Wall Street Tuesday as oil prices slid sharply for a second day and inflation worries ebbed. (Courtney Crow/New York Stock Exchange via AP)
 
 
  photo  In this photo provided by the New York Stock Exchange, trader Michael Urkonis works on the floor, Tuesday, March 15, 2022. Stocks are rallying on Wall Street Tuesday as oil prices slid sharply for a second day and inflation worries ebbed. (Courtney Crow/New York Stock Exchange via AP)
 
 

Print Headline: Stocks rally after oil prices slide 6%

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