US stocks climbed, oil prices fell and Treasury yields hit their highest level in almost three years as investors surveyed developments in Ukraine and awaited a likely interest-rate increase by the Federal Reserve this week.
The S&P 500 rose 0.5% Monday. The benchmark stock index has fallen for four of the five past weeks. Investors have been spooked by the war in Ukraine and a rally in commodity prices sparked by the conflict, on top of the prospect of rising rates. They have pushed into perceived havens such as gold, while selling stocks.
Investors said positive comments from both Ukrainian and Russian officials about a round of negotiations had boosted markets Monday. The Dow Jones Industrial Average gained 0.7% and the technology-focused Nasdaq Composite Index added 0.2%.
The yield on 10-year Treasury notes rose to 2.09% Monday from 2.004% Friday. Yields move in the opposite direction to bond prices and are on course for their highest close since July 2019.
“The predominant story today is the better mood music coming out of Ukrainian and Russian negotiators,” said Edward Park, chief investment officer at Brooks Macdonald. “Expectations were pretty low at the tail end of last week.”
“There’s certainly a risk of a short-term bout of volatility should negotiations either pause or look like they’re turning in the wrong direction,” he added.
Shares of Apple fell 1.4% as a Covid-19 outbreak in China disrupted manufacturing by a key supplier in the city of Shenzhen. Occidental Petroleum fell 6.7%.
China’s Shanghai Composite Index dropped 2.6% after Shenzhen went into lockdown to contain the coronavirus. In Europe, the Stoxx Europe 600 rose 0.9%, led by shares of auto makers and banks.
The lockdown could knock oil demand, and brent-crude futures, the international benchmark, fell 5.6% to $ 103.19 a barrel. A week ago, Brent prices hit $ 139 a barrel, their highest level since 2008, as the war in Ukraine disrupted global commodity markets.
Elsewhere in commodity markets, nickel trading remained suspended on the London Metal Exchange, which stopped the market last week to contain a huge run-up in prices.
Investors are turning their attention toward the Federal Reserve’s monetary policy meeting, which wraps up Wednesday. The central bank is expected to raise its benchmark rate for the first time since 2018 as officials look to cool demand and control inflation. It is navigating an unusually complicated environment of a tight labor market, supply disruptions and lately, the war in Ukraine.
Despite hopes for the negotiations, the conflict is intensifying and there are increasing concerns among officials and investors that the war could spill out of Ukraine. A Russian airstrike on a Ukrainian military training center close to the Polish border killed 35 people Sunday. Russia has asked China for military equipment and other assistance for its war effort, according to US officials.
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