The S&P 500 and Nasdaq Composite dipped Monday as a spike in oil prices added another threat to an economy already struggling from Federal Reserve rate hikes and recent turmoil in the banking sector.
The output cut from OPEC+, which is slashing 1.16 million barrels per day, sent oil prices soaring. West Texas Intermediate crude was 6.6% higher, while international benchmark Brent crude climbed 6%.
Traders are shedding optimism from recent market strength with the prospect of higher oil prices adding to fears of higher inflation and a looming recession.
The Energy Select Sector SPDR fund (XLE), which tracks the S&P 500 energy sector, also popped more than 3% in the premarket. Marathon Oil and Halliburton were the fund’s best performers, rising more than 6% each.
All three major averages were positive in the first quarter, despite turmoil in the banking sector highlighted by the collapse of Silicon Valley Bank in March. The Nasdaq Composite led the way in the quarter with a gain of 16.8% while the S&P 500 rose 7% in the first three months of the year for its second-straight positive quarter. The Dow industrials lagged but still managed to grind out an advance of 0.4%.
“For now at least, tech is seen as a safe haven of all things, immune to the news in banking. The S&P 500, in turn, seems held together by its own heavy weighting in tech, names like Microsoft, Apple and the like,” Wellington Shields technical analyst Frank Gretz said in a note to clients.
The first week of the new quarter is a shortened one for Wall Street, as trading will be closed for Good Friday. However, there will be several key pieces of economic data for investors, including job openings data on Tuesday, ADP private payrolls report on Wednesday and the closely watched monthly jobs report on Friday.
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