Market Snapshot: U.S. stocks slip lower as oil prices surge amid expected ban on Russian imports

The Dow’s decline saw the blue-chip gauge enter a market correction, as the benchmark was 11% lower than its Jan. 4 record high, while the Nasdaq entered a bear market, with the tech-heavy index down more than 20% from its record peak in November.

What’s driving markets

President Joe Biden was expected to announce a ban on Russian oil imports Tuesday morning, reports said, as further punishment of Moscow for its invasion of Ukraine. Biden is set to speak at 10:45 a.m. Eastern, and announce “actions to continue to hold Russia accountable for its unprovoked and unjustified war on Ukraine,” according to the White House.

Oil futures extended a rise, with the U.S. benchmark CL.1, +6.31% up 7.7% to trade above $128 a barrel after closing Monday at its highest since September 2008.

Russia’s deputy prime minister, Alexander Novak, said the country could cut vital natural gas supplies to Europe, and said oil prices could jump to $300 per barrel if the West imposed a ban on Russian oil.

“The surge in oil prices has benefited U.S. energy stocks,” noted David Bahnsen, chief investment officer, at the Bahnsen Group, in emailed comments. Energy is the only one of the S&P 500’s 11 sectors in positive territory for 2022, up nearly 40% year to date.

“With higher prices, oil producers receive higher profits for their product. Even with the surge in oil prices, there are still additional opportunities in the energy stock sector, such as the midstream area, which is responsible for transporting and storing oil,” he said. “The transportation of energy plays a huge future of the U.S. energy story.”

Read: What soaring oil prices mean for the stock market as Dow tumbles into correction

The gyrations in commodities markets continued Tuesday, this time in nickel, where on the London Metal Exchange, prices jumped past $100,000 per ton before a trading halt.

“Investors should be prepared for further market volatility, and losses from here are still possible,” said Seema Shah, chief strategist at Principal Global Investors, in a note. “Even as headlines disrupt and distort the underlying picture, the investment trends that are emerging are based on fundamentals, and therefore should likely solidify in the coming weeks and months ahead.”

Shah said that given the chaos, U.S. equities “have held up well — particularly relative to Europe.” The Stoxx Europe 600 SXXP, -0.61% has dropped more than 15% so far in 2022, while the S&P 500, the U.S. large-cap benchmark, is down 12.7%. In dollar terms, the pan-European index is down nearly 20%.

“Not only is this a reflection of the underlying strength of the U.S. economy, but also America’s status as a net energy exporter,” she said. “By contrast, as a net energy importer dependent on Russian oil and gas, the European economy faces considerably greater downside economic risk.”

Earlier, a report by Bloomberg News that the European Union was looking to jointly finance energy and military spending briefly brought some cheer to beleaguered markets.

European leaders are meeting in Versailles this week to announce plans to reduce its dependence on Russian energy and Bloomberg reported that the joint spending plan would come after this meeting.

“Hopes that European countries will be given financial breathing space through a huge joint bond issue helped bring a sense of calm to equity markets in early trading in Europe,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

The National Federation of Independent Business said its small-business optimism index dropped 1.4 points to 95.7 in February, a one -year low. The largest number of small businesses since 1981 said high inflation is their chief worry, with many increasing prices to offset their own rising costs.

Which companies are in focus?

• Google parent Alphabet Inc. GOOGL, +0.97% said Tuesday it had signed a definitive agreement to acquire cybersecurity company Mandiant Inc. MNDT, -2.27% for $23 a share or about $5.4 billion in cash. The stock closed Monday at $22.49. Mandiant shares were down 2.5%, while Alphabet shares were off 0.1%.

What are other assets doing?

• The yield on the 10-year Treasury note jumped 10 basis points to 1.846%. Yields and debt prices move opposite each other.
• The ICE U.S. Dollar Index DXY, -0.10%, a measure of the currency against a basket of six major rivals, was down 0.2%.
• Gold futures GC00, +3.27% rose 3.5% to around $2,066 an ounce.
• Bitcoin BTCUSD, +2.36% was up 1.2% near $38,450.
• The Stoxx Europe 600 fell 0.4%, while London’s FTSE 100 UKX, -0.19% rose 0.1%.
• The Shanghai Composite SHCOMP, -2.35% dropped 2.4%, while the Hang Seng Index HSI, -1.39% fell 1.4% and Japan’s Nikkei 225 NIK, -1.71% declined 1.7%.