By Geoffrey Smith
Investing.com -- U.S. stock markets opened lower on Wednesday, running into profit-taking after the strong gains of the last week as the prospects for a long and profound disruption to the world economy from Russia's invasion of Ukraine appeared to become more realistic.
Overnight, Russia had unilaterally tightened the world oil market by claiming that an export terminal taking Kazakh oil to world markets via the Black Sea had to be closed for up to two months to allow repairs to storm damage. The Caspian Pipeline Consortium's link was due to ship some 1.5 million barrels a day of crude in April, according to Argus Media.
Additionally, NATO Secretary General Jens Stoltenberg warned Russia that the use of nuclear weapons, which has been mentioned in passing by various official and non-government figures in Russia as a possible course of action, would "change the nature" of the Ukraine war. Stoltenberg said Russia must understand it cannot win a nuclear war, and also called on China to stop spreading what he called Russian "lies and disinformation" about its actions in Ukraine.
By 9:45 AM ET (1345 GMT), the Dow Jones Industrial Average was down 288 points, or 0.8%, at 34,519 points. The S&P 500 was also down 0.8% and the Nasdaq Composite was down 1.1%, giving up more than half of its Tuesday gains.
Crude oil prices surged again on the latest round of back-and-forth, which included Polish preparations to expel 45 Russian diplomats for spying and demand from Vladimir Putin that Europe pay for its Russian oil and gas in rubles. U.S. crude futures rose 4.2% to $113.83 a barrel, while Brent futures topped $120 a barrel for the first time in two weeks. Oil and gas stocks rose in sympathy, with Chevron (NYSE:CVX) stock rising 1.3%, Exxon Mobil (NYSE:XOM) stock rising 2.6% and Occidental Petroleum (NYSE:OXY) stock rising 3.6%. Occidental is the most highly leveraged of the three and typically reacts more to changes in crude prices as a result.
Stocks catching the eye in early trading included Adobe (NASDAQ:ADBE) stock, which fell 8.0% after warning of war-related disruptions to its operations that affected its guidance for the coming quarter. Tencent Holdings ADRs (OTC:TCEHY) also fell 7.6% after the Chinese Internet giant recorded its slowest-ever quarterly sales growth, reviving fears that the regulatory crackdown in China has permanently changed the long-term outlook, despite promises of relief from vice-premier Liu He last week.
Elsewhere, General Mills (NYSE:GIS) stock rose 4.7% after the maker of Cheerios raised its forecasts for profit and revenue this year, a signal that it is comfortable with passing on higher input prices to consumers. GameStop (NYSE:GME) stock rose 12.1% after disclosures that chairman Ryan Cohen had bought another 100,000 shares. Cohen's involvement with the videogames retailer has been a central pillar of the narrative that has fired retail investors' imaginations over the last year.
Sentiment was also hurt at the margins by signs that rising long-term interest rates are starting to cool the housing market. New home sales fell surprisingly for the second month in a row in February, while the Mortgage Brokers Association said that mortgage applications fell by over 8% last week, as the benchmark 30-year mortgage rate soared to 4.50%. It's now risen 150 basis points in the last seven months.