NEW YORK — Oil prices are back to jumping on Wednesday, while the U.S. stock market is holding relatively steady ahead of a U.S. Federal Reserve decision on what to do with interest rates.
The S&P 500 slipped 0.1%. The Dow Jones Industrial Average was down 458 points, or 0.9%, as of 9:35 a.m. Eastern time, and the Nasdaq composite was 0.1% higher.
The action was stronger in the oil market, where the price of Brent crude leaped 5.6% to US$86.64 per barrel after fighting resumed in the war with Iran and raised worries about the global flow of oil. Iran launched a barrage of missiles at American forces in the Middle East, while the U.S. military partnered with Saudi Arabia to strike Tehran-backed militias in Iraq.
Brent oil’s price had swung as low as $72 early this month and as high as $102 last week on uncertainty about whether the United States and Iran could reach a deal to allow oil tankers to move freely again from the Middle East to customers worldwide.
The swings have raised worries that inflation could reaccelerate, just when it had begun to slow more than economists expected. That in turn has traders uncertain about what the Federal Reserve will announce after its two-day meeting on interest rates concludes later in the day.
Traders are betting on a roughly 36% probability that the Fed will raise its main interest rate, which would be the first increase in three years. Higher rates can keep a lid on inflation, but they can also slow the economy and undercut prices for stocks and other investments.
Higher rates can particularly hurt stocks that are seen as the most expensive, and scrutiny has already been rising on makers of computer chips and other winners whose prices have soared because of the frenzy around artificial-intelligence technology. Their rises are backed with real growth, but it may not be sustainable if AI does not produce as much profit and productivity as hoped.
The skepticism hit South Korea’s stock market in particular because it’s dominated by two tech giants, Samsung Electronics and SK Hynix. Seoul’s Kospi index tumbled six per cent, a day after it plunged 10.8%, and trimmed its gain for the year so far to 34.4%.
SK Hynix’s stock in Seoul dropped 9.6%. It reported record amounts of revenue and profit for a quarter thanks to strong demand because of AI. But its 257% growth in revenue still wasn’t enough to meet analysts’ expectations.
Stocks were mixed elsewhere in the world, with Hong Kong’s Hang Seng rising two per cent but France’s CAC 40 falling 0.7%.
In the bond market, Treasury yields edged up as oil prices rose. The yield on the 10-year Treasury climbed to 4.62% from 4.61% late Tuesday.
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AP Business Writers Yuri Kageyama and Matt Ott contributed to this report.
By Stan Choe