Wall St set to fall on inflation angst as oil breaches $130
Countries from Japan to the United States discussed banning Russian oil imports in response to the country's invasion of Ukraine, fueling an 18% jump in Brent to its highest since 2008
Summary:
- Energy stocks outperform in premarket trading
- Big banks, travel shares lead declines
- Futures down: Dow 0.6%, S&P 0.6%, Nasdaq 0.6%
US stocks were set to open lower on Monday as the prospect of a ban on oil imports from Russia pushed Brent above $130 a barrel and added to concerns over spiraling inflation and slowing economic growth.
Countries from Japan to the United States discussed banning Russian oil imports in response to the country's invasion of Ukraine, fueling an 18% jump in Brent to its highest since 2008.
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Germany, heavily reliant on Russian gas supplies, is not currently planning to stop importing but is keeping the option open, Finance Minister Christian Lindner said.
"When you've got the combination of impacts from the Covidpandemic, heightened inflation to Russia situation, it's a fix for heightened volatility," said Greg Bassuk, chief executive at AXS Investments in Port Chester, New York.
"We're very bullish on equities, but we're cautioning investors to brace for a rough ride over the next few weeks."
The CBOE volatility index, also known as Wall Street's fear gauge, rose for the second straight day and was last trading at 33.92.
Russia, which calls the campaign it launched on 24 February a "special military operation", has told Ukraine it is ready to halt military operations "in a moment" if Kyiv meets a list of conditions, the Kremlin spokesman said.
The S&P 500 energy sector has surged 34.8% so far in 2022, outperforming the other major S&P sectors. The spike in oil prices comes as investors closely watch the US consumer prices report on Thursday, with a hotter reading likely to seal a Federal Reserve rate hike later this month.
Citigroup Inc fell 2.5% in premarket trading, the most among the big banks, as Jefferies downgraded the stock to "hold" from "buy".
US payment services providers Visa, American Express Mastercard fell between 1.8% and 2.0% after they suspended operations in Russia.
The S&P 500 financial sector has fallen 5% so far this year as investors worried about how the West's sanctions against Moscow may affect the international financial system.
Cruise operator Royal Caribbean Cruises Ltd and carrier United Airlines Holdings Inc slipped 2.2% and 4.0%, respectively, to lead losses among travel companies, as the jump in oil prices threatens to again disrupt a nascent recovery.
Defense stocks L3Harris Technologies Inc , Northrop Grumman Corp and Lockheed Martin Corp gained more than 1% each.
At 08:31 a.m. ET, Dow e-minis were down 213 points, or 0.63%, S&P 500 e-minis were down 24.25 points, or 0.56%, and Nasdaq 100 e-minis were down 84.75 points, or 0.61%.
Wall Street ended lower on Friday as the war in Ukraine overshadowed an acceleration in US jobs growth last month that pointed to strength in the economy.
Data on Thursday is expected to show that core US CPI for February rose 6.4% year-on-year, according to a Reuters poll, up from 6% in January.
Fed Chair Jerome Powell last week backed a 25-basis-point rate hike at the central bank's March 15-16 policy meeting and would be "prepared to move more aggressively" later if inflation does not abate as fast as expected.
Traders now see a 99% probability of a 25 basis point rate hike by the Fed at its March meeting, while a 1% chance of no change in rates. IRPR
