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Financial Markets 03/02 09:27
NEW YORK (AP) -- Oil prices climbed, and stock markets slipped Monday as
investors and households got the first chance to see what the war in the Middle
East could mean for their finances.
Crude prices jumped more than 6%, which will likely translate into higher
prices at gasoline pumps, because of fears that a widening war could slow the
global flow of oil. More expensive fuel will also hit many U.S. companies, and
sinking stocks for airlines, cruise lines and others helped drag the U.S. stock
market lower.
The S&P 500 fell 0.3% after dropping as much as 1.2% at the start of
trading. The Dow Jones Industrial Average was down 165 points, or 0.3%, as of
10:05 a.m. Eastern time, and the Nasdaq composite was 0.3% lower.
Prices climbed for natural gas, meanwhile, which could mean higher heating
bills for the remainder of the winter, after a major supplier of liquefied
natural gas to Europe said it would stop production because of the war. Gold
climbed 2.2% as investors looked for safer things to own and as U.S. officials
tried to persuade the world that this war will not last forever.
"This is not Iraq," U.S. Defense Secretary Pete Hegseth said Monday. "This
is not endless."
Typically, Treasury yields also fall when investors are feeling nervous. But
yields instead climbed, in part because higher oil prices will put upward
pressure on inflation, which is already above what most everyone would like.
That could tie the Federal Reserve's hands and keep it from cutting interest
rates.
Lower interest rates can help the economy and job market, while also
worsening inflation. Higher rates can do the opposite.
Past military conflicts in the Middle East have not caused long-term drops
for markets. For this war to knock down U.S. stocks in a significant and
sustained way, the price of oil would perhaps need to jump above $100 per
barrel, according to strategists at Morgan Stanley led by Michael Wilson.
They're still well below there. A barrel of benchmark U.S. crude rose 6.3%
to $71.23. Brent crude, the international standard, climbed 7.2% to $78.15 per
barrel.
At the moment, nevertheless, fear is rising.
Stocks of airlines were some of Monday's sharpest losers. Not only do higher
oil prices threaten their already big fuel bills, the fighting in the Middle
East closed airports and left travelers stranded.
United Airlines fell 3.3%, and American Airlines lost 4.3%.
Norwegian Cruise Line Holdings fell even more, 11.9%. It needs customers to
have plenty of cash to spend after paying for their gasoline bills and other
essentials.
The cruise operator also reported a stronger profit for the latest quarter
than analysts expected, though its revenue fell short. Its forecast for profit
this upcoming fiscal year was weaker than analysts expected.
Hotels, discount retailers and other companies that benefit when customers
have more cash in their pocket from lower fuel bills also lagged the market.
MGM Resorts fell 5.1%, and Dollar Tree lost 2.9%.
Stocks in the housing industry also struggled as higher Treasury yields
could translate into higher mortgage rates. Paint company Sherwin-Williams fell
3.1%, and homebuilder D.R. Horton lost 2.9%.
Helping to limit Wall Street's losses were oil companies, which benefited
from the rising prices for crude. Exxon Mobil climbed 2.1%, and Occidental
Petroleum rose 2.1%.
Companies that make equipment for the military also rallied. Lockheed Martin
climbed 3.5%, and RTX rallied 3.6%.
In stock markets abroad, indexes fell across much of Europe and Asia.
Germany's DAX lost 2.3%, France's CAC 40 fell 2.1% and Hong Kong's Hang Seng
dropped 2.1% for some of the world's larger losses.
Stocks in Shanghai were an outlier and rose 0.5%.
In the bond market, the yield on the 10-year Treasury rose to 4.03% from
3.97% late Friday. A report showing growth for U.S. manufacturing was better
than economists expected last month also helped to lift yields.
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
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