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U.S. shares drop as soaring oil prices stir inflation woes; Yen wilts

EconomyOct 11, 2021 05:02PM ET
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2/2 © Reuters. FILE PHOTO: People wearing protective masks, amid the coronavirus disease (COVID-19) outbreak, are reflected on an electronic board displaying Japan's stock prices outside a brokerage in Tokyo, Japan, October 5, 2021. REUTERS/Kim Kyung-Hoon 2/2

By Koh Gui Qing

NEW YORK (Reuters) - U.S. shares fell on Monday, having whip-sawed between gains and losses as soaring oil prices that hit multi-year peaks stoked fears about rising prices and tighter monetary policy, lifting the dollar to a near-three-year high against the yen.

A rally in basic material and energy shares on higher oil prices initially lifted major U.S. stock indices. But the gains faded as investors focused on the start of the U.S. corporate earnings season next week.

Some analysts anticipate businesses reporting slowing growth due to supply-chain snags and rising prices. They warned that this could lead to a drop in U.S. stocks.

"Whether the final chapter of the mid-cycle transition ends with a 10% or 20% correction in the S&P 500 will be determined by how much earnings growth decelerates or has to outright decline," Morgan Stanley (NYSE:MS) analysts said in a note.

"We are gaining confidence in a sharper deceleration but the timing is more uncertain."

The Dow Jones Industrial Average lost 0.72%, the S&P 500 fell 0.69%, and the Nasdaq Composite dropped 0.64%.

The pan-European STOXX 600 index was little changed, edging up just 0.05%, while MSCI's gauge of stocks across the globe shed 0.33%.

Heading into Tuesday, the mood in Asia could also be hit by news that Chinese property developer Evergrande may miss its third round of bond payments in as many weeks and rivals Modern Land and Sinic became the latest scrambling to delay deadlines.

Oil prices, which had jumped on Monday on rebounding demand and cutbacks in supply, gave up some of their early gains but still ended the session higher. [O/R]

Brent crude rose 1.5% to $83.65 a barrel, after climbing as high as $84.60, its highest since October 2018.

U.S. West Texas Intermediate crude also added 1.5% to finish at $80.52, after touching its highest since late 2014 at $82.18.

Analysts are divided over whether energy supplies are tight enough to warrant oil testing $100 a barrel, but most seemed to agree prices are likely to stay elevated in the short-term.

That helped basic materials and energy stocks in the S&P 500. They jumped 0.96% and 0.88% respectively, Refinitiv data showed, outperforming the broader market.

Rising prices are also fueling bets that major central banks will tighten monetary policy sooner rather than later, lifting the dollar to a near three-year peak against the Japanese yen.

In the United States, investors expect the Federal Reserve to begin tightening policy by announcing a tapering of its massive bond-buying next month. This has hobbled the yen, which is typically sensitive to interest-rate differentials.

The yen weakened 1.02% against the greenback at 113.38 per dollar, and the dollar index rose 0.238%.

A stronger dollar pushed the euro down 0.14% to $1.1551.

Gold, usually seen as a hedge against inflation, fell as a stronger dollar offset any inflation-driven gains. Spot gold dropped 0.2% to $1,753.42 an ounce. U.S. gold futures fell 0.15% to $1,753.60 an ounce.

Bitcoin, a barometer of investors' risk appetites, receded a touch but was still up a solid 4.4%.

Oil vs US stock market in 2021 https://fingfx.thomsonreuters.com/gfx/mkt/jnvweweglvw/Pasted%20image%201633718533077.png

U.S. shares drop as soaring oil prices stir inflation woes; Yen wilts
 

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Comments (9)
Rodney Dangerfield
Rodney Dangerfield Oct 11, 2021 8:46PM ET
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gas prices won't get me down I get around by electric scooter and I'm poor and stupid I like NASCAR Go Brandon
Rodney Dangerfield
Rodney Dangerfield Oct 11, 2021 6:16PM ET
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While some of you bank on cryptocurrency behind the scenes it's being calculated how much you owe at the same time the very thing that needs to happen the whole reason a feather pen and inkwell is on your USD $100 bills all it would take is a stroke of a pen to take us off of the Fiat system back to being backed by gold.. no one is talking about this and the answer is right in front of you
William Smith
William Smith Oct 11, 2021 5:37PM ET
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Biden's energy policies are paying off on spades for all OPEC members, just like the Democrat leftists planned.
Rodney Dangerfield
Rodney Dangerfield Oct 11, 2021 5:37PM ET
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damn biden and those Democrats if Trump wouldn't have signed that deal with OPEC lol
Vlad Lozovskiy
Vlad Lozovskiy Oct 11, 2021 12:37PM ET
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It is time for Biden to close few more oil wells and pipelines!!!!   I remember when democrat voter were happy about that.  how do you feel today?
Rodney Dangerfield
Rodney Dangerfield Oct 11, 2021 12:37PM ET
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I feel like I wish Trump didn't sign that deal with OPEC lol
James Pattison
James Pattison Oct 11, 2021 10:51AM ET
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Inflation is a tax that mostly impacts middle and low wage earners…
Casador Del Oso
Casador Del Oso Oct 11, 2021 10:11AM ET
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stagflation fears, yet market is up. BS is getting really deep.
James Pattison
James Pattison Oct 11, 2021 10:11AM ET
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Looks like a short squeeze
Dave Jones
Dave Jones Oct 11, 2021 7:56AM ET
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and of course silver is down because....urrrhuurp a durrrp...gawsh?!
James Pattison
James Pattison Oct 11, 2021 7:56AM ET
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Silver and gold are manipulated markets
eduff duff
eduff duff Oct 10, 2021 9:03PM ET
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And oil still too strong as always
Ferdinando Riboni
Ferdinando Riboni Oct 10, 2021 8:48PM ET
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Government numbers are all fake go to the streets the peaple are getting hungry. homeless and desperate
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Fong SH
Fong SH Oct 10, 2021 8:48PM ET
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the daber is awesome  I agree with you, people just getting too choosy, take any jobs first, at least there's temporary income. While on the job, lookout for a better job, that's the way to survive, beggars still choosy? Even a small amount helps you in your daily bread and butter, your own expenses too.
olugbenga adewale
olugbenga adewale Oct 10, 2021 8:48PM ET
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I sincerely love your write up.
Jm Vm
Jm Vm Oct 10, 2021 8:48PM ET
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Fong SH Here's a better idea, don't take those low paying jobs and the business owners will raise the wage to one that is MORE than just enough to survive. Let them do their own work if they don't or better yet go out of business if they can't or refuse to pay a decent wage!
William Smith
William Smith Oct 10, 2021 8:48PM ET
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Jm Vm JM, then no one can afford their products and services. That will end real well.
Jm Vm
Jm Vm Oct 10, 2021 8:48PM ET
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William Smith Sure, and every time prices increase workers get raises. Ur too funny to ever take seriously! lol!!
 
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