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Market Snapshot: U.S. stocks close lower after inflation stays at 40-year high, Ukraine-Russia talks stall

U.S. stock indexes closed lower Thursday, but off the days worst levels, as bond yields rose in the wake of higher U.S. consumer price inflation, a hawkish tilt from the European Central Bank, and stalled Russia-Ukraine negotiations.

However, energy and grains prices slipped back further after surging in the wake of supply disruptions cause by the war in Ukraine and E.U. and U.S. sanctions on Russia in the past week.

How did stock-index futures trade?

The Dow Jones Industrial Average
DJIA,
-0.34%

closed down 112.18 points, or 0.3%, to 33,174.07.

The S&P 500
SPX,
-0.43%

dropped 18.36 points, or 0.4%, to 4,259.52.

The Nasdaq Composite
COMP,
-0.95%

was down 125.58 points, or 0.9%, at 13,129.96.

On Wednesday, the Dow industrials rose 653.61 points, or 2%, to end at 33,286.25, the S&P 500 rose 2.6%, for its biggest daily percentage gain since June 5, 2020. The Nasdaq Composite advanced 3.6% for its strongest daily percentage rise since March 9, 2021.

What drove markets?

Stocks handed back a chunk of Wednesday’s strong rebound on Thursday as data showed U.S. February consumer prices rose to 7.9%, a 40-year high, with some seeing more inflation to come due to the Russia-Ukraine war. In other data, weekly U.S. jobless benefit claims edged up 11,000 to 227,000.

“For those looking for some reprieve in the latest CPI numbers, they were surely disappointed as February’s CPI data indicated further upward consumer prices pressures were present,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.

“Overall, the data likely doesn’t change the objective of the Fed as the need to move policy rates off zero has been apparent for some time,” Ripley said.

However, markets have been whipsawed by the Ukraine war and the resulting huge rises in energy and grains prices in particular. U.S. crude oil futures
CL00,
-2.67%

CL.1,
-2.67%

CLJ22,
-2.67%

ended lower again on Thursday, a day after global benchmark prices suffered the biggest one-day percentage loss in nearly 2 years.

High-level negotiations in Turkey between Russia and Ukraine foreign ministers earlier on Thursday failed to make progress as Russian forces continued to lay seige to major Ukraine cities, including a deadly attack on a maternity hospital in Mariupol.

Read: Wartime market volatility on display as stocks surge, dollar and oil plunge

Despite something of an afternoon rally that cut losses across stock indexes by more than half, the mood across markets remains bleak.

Goldman Sachs
GS,
-1.11%

dropped 1.1% after announcing it is closing down its Russian business and JPMorgan
JPM,
-1.18%

made a similar announcement on Thursday afternoon.

“There’s no optimism,” said Michael Batnick, Director of Research at Ritholtz Wealth Management LLC. “If you look at the investor sentiment survey, the spread between bulls and bears remains pretty low. In fact, if you’re looking for a glimmer of hope, it’s that no one is bullish.”

That bearish feeling, deepened by inflation data and global unrest, could persist said Batnick.

“What does the [Federal Reserve] do now?” asked Batnick. “They can’t not hike. We’ve never seen a situation where inflation is this high without it being followed by a recession. Can we have a soft landing? It’s never happened before.”

That pressure on central bankers was evident on Thursday, with the European Central Bank leaving key interest rates unchanged, but announcing plans to speed up its asset-purchasing program exit, as it described Russia’s invasion of Ukraine a “watershed moment.”

“The Russian invasion of Ukraine will negatively affect the euro-area economy,” said ECB President Christine Lagarde, in a press conference.

Which companies were in focus?

Shares of Amazon.com
AMZN,
+5.41%

climbed 5.4% after the e-commerce giant announced plans for a 20-to-1 stock split, the first split since the dotcom boom.

How did other assets trade?

The yield on the 10-year Treasury note
TMUBMUSD10Y,
1.994%

rose 4 basis points to 1.995%. Yields and debt prices move opposite each other.

The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, rose 0.6%.

Gold futures for April delivery 
GC00,
+0.64%

GCJ22,
+0.64%

settled up 0.74% to $2,003.30 an ounce.

Bitcoin
BTCUSD,
+0.07%

fell nearly 5.7% to $39,576.80.

In European equities, the Stoxx Europe 600 
SXXP,
-1.69%

fell 1.6%, while London’s FTSE 100 UKX declined 1.3%.

In Asia, the Shanghai Composite SHCOMP rose 1.2%, along with the Hang Seng Index HSI and Japan’s Nikkei 225 NIK surged 3.9%.

Additional reporting by Barbara Kollmeyer

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