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(Monday Market Close) The S&P 500 (SPX) broke the 4,300 support level that had been in place since July 2021 and tested it a few times after WTI crude oil futures spiked over the weekend—trading as high as $130 per barrel—as an increasing number of companies are choosing not to buy Russian oil. However, oil prices retreated to $120.10, which was still 3.8% higher than the closing price on Friday.
Fear and uncertainty continue to rise, causing the Cboe Market Volatility Index (VIX) to rise more than 11%. Fear is high enough that initial public offerings (IPOs) are disappearing. January had a record number of cancellations at 22. Currently, there are no IPOs listed on the Nasdaq IPO Calendar for any American exchange in March or going forward.
Commodity Conundrum
Oil was not the only petroleum product to spike. RBOB gasoline futures rallied more than 10% over the weekend but gave back most of its gains and closed just 1.17% higher on the day. Heating oil futures closed 4.82% higher despite reaching nearly 13% higher Sunday evening.
The reasons for the spikes are that many private companies are refusing to buy Russian oil and the United States and European allies are considering bans on Russian commodities, according to U.S. Secretary of State Antony Blinken. Previously, these groups have avoided bans on Russian commodities because of how these embargos could hurt consumers already struggling under the weight of pandemic-related inflation.
Government officials are hoping that reduced sanctions on Iran and Venezuela will get more oil supplies to market and help alleviate some of the pricing pressures. Additionally, Republicans are pressuring President Joe Biden to repeal some of his executive orders signed when he first came into office. These orders banned some offshore drilling as well as some drilling on public lands.
Interest in Rates
Rising inflation and falling economic forecasts has rekindled talk of stagflation. Stagflation is the economic phenomenon where a country sees rising inflation despite a slow economy. The United States experienced stagflation in the late 1970s, which resulted in the Fed hiking the overnight rate to 20% in the early 1980s.
Head & Shoulders Below the Rest
With that said, the shoulder line was broken about two weeks ago, and the bulls were able to push the index back above the line. Can the bulls stampede again?
TD Ameritrade® commentary for educational purposes only. Member SIPC.
Image sourced from Pixabay
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