The Dow Jones fell nearly 800 points in mid-week trading, reversing all of the recent rebound made, while the S&P 500 and Nasdaq closed with losses of up to 1.5% each during the session.
These were the three major contributing factors to the fall on Wall Street:
Rising Oil Prices
After being subdued and threatening to break below the $100 a barrel mark, Brent crude prices staged a sharp rebound after Israel’s attack on Iran’s South Pars gas field, which is one of the largest in the world.
In retaliation, Qatar announced that the Ras Laffan industrial city was hit with missiles. Ras Laffan houses one of the biggest LNG production complex, which was already shut earlier this month due to the attacks.
Iran has also declared that with an attack on their energy infrastructure, any similar unit with a semblance of US interest, has now become a “legitimate target”. These include the Ras Laffan refinery and the Mesaieed petrochemical complex in Qatar, the Samref refinery and the Jubail petrochemical complex in Saudi Arabia, and the Al Hosn gas asset in the UAE.
With Brent nearing $110, US crude prices are also near $100 a barrel, currently hovering around the mark of $98.
The Fed Decision
On expected lines, the US Federal Reserve left interest rates unchanged between 3.5% to 3.75%, but commentary from Fed Chair Jerome Powell left the street worried.
Powell said that inflation has not made progress the way they anticipated and if that does not happen, there will be no rate cut, despite the dot plot still sticking to one cut for the year.
The Fed Chair also said that while the Iran war will push up inflation in the near-term, it is too early to determine the actual economic impact of the war.
Powell will also stay on as Fed Chair till the confirmation of his successor Kevin Warsh from the Senate and on the Board of Governors, till the investigation against him is complete. While Powell’s term as Chair ends in May, he can stay on in the Board of Governors till early 2028.
The Inflation Hit
Last month’s producer price index figure had sent Wall Street tumbling. This month was no different.
Producer Price Index (PPI) for February rose 0.7% month-on-month, much above the 0.3% estimate, while core PPI was up 0.5%, also above the 0.3% expectation.
On a year-on-year basis, the PPI rose by 3.4%, while the core PPI was up 3.9%.
Wednesday turned out to be the worst Fed policy day for the S&P 500 since 2024, with over 420 stocks ending with losses.
