Dow tumbles as West considers cutting off Russian oil

US stocks ended Monday lower as investors continued to monitor the military conflict between Russia and Ukraine. It was the worst day of the year for the Dow and S&P 500.

The Nasdaq is now in a bear market as tech stocks were crushed. Energy stocks and utilities were among the few winners following a big spike in crude oil and gas prices. Several defense stocks hit new all-time highs as well.

Bed Bath & Beyond (BBBY) surged after Ryan Cohen, the Chewy (CHWY) co-founder who is trying to turn around GameStop (GME), disclosed he purchased a big stake.

As stocks settle after the trading day, levels might still change slightly.

It’s a crude awakening for travel stocks. Shares of airlines, hotels, cruise lines and other leisure companies plunged Monday following another spike in oil prices.

The US Global Jets ETF (JETS), which includes Delta (DAL), United (UAL), Southwest (LUV) and most of the other major airline stocks, plunged 11%. Cruise lines Carnival (CCL), Royal Caribbean (RCL) and Norwegian (NCLH) plummeted between 9% and 12%.

Several other travel stocks, including hotel chains Hyatt (H), Hilton (HLT) and Marriott (MAR), rental car company Avis Budget (CAR), online travel sites Expedia (EXPE) and Booking (BKNG) and home sharing king Airbnb (ABNB) were all down sharply too.

If it’s any consolation, the huge slides are due to good old fashioned inflation concerns and not worries about the Covid-19 pandemic or any new travel restrictions.

With a half hour left in the trading day, the Dow is down nearly 700 points, near the lows of the day.

The Nasdaq was down 3% and the broader S&P 500 fell 2.7%.

The Russian Ruble has plunged even further against the dollar, hitting record lows, as talk grows over possible sanctions against Russian energy. The US dollar/Russian Ruble is currently trading at around 155, meaning $1 is worth 155 rubles.

Before the conflict with Ukraine began, it was trading between 70 to 80 rubles to the dollar. On Monday’s lows, the Russian ruble has lost 90% of its value against the US dollar since the beginning of the year.

The ruble has plunged as the West brings in tough economic sanctions and the Russian government introduced capital controls to try and stop the flow of money out of Russia. 

It’s more like March sadness, as opposed to madness, for stock market investors. The broader indexes continued to fall Monday and hit their lows of the day in mid-afternoon trading. Worries about the Russian invasion of Ukraine and spiking oil prices are still making traders very nervous.

The Dow was down about 600 points, or 1.8%. The average of 30 blue chip industrials has now plunged nearly 10% so far in 2022. The S&P 500 and Nasdaq were faring even worse. Each was down more than 2% Monday. The S&P 500 has fallen 11% in 2022 while the Nasdaq has plummeted nearly 17%.

Investors were fleeing stocks and other risky assets, such as bitcoin, and were flocking to the safety of gold and the US dollar.

Even energy stocks weren’t immune to the sell-off. Dow component Chevron (CVX) was lower Monday and Occidental Petroleum (OXY) gave up earlier gains and was down 5% midday. In a battle of mega-billionaires, Carl Icahn sold his stake in the oil company while Warren Buffett’s Berkshire Hathaway boosted its investment.

The flight to quality assets that has lifted gold this year is also helping another classic safe haven investment — the US dollar. The greenback is trading against other major currencies at a level that it last hit in May 2020, shortly after the start of the Covid-19 pandemic.

The ICE US Dollar Index has gained 3% this year. That may not sound like a lot. But it’s a fairly dramatic move in the usual sleepy world of government-backed paper currencies.

The dollar’s strength is all the more remarkable when compared to bitcoin, the so-called future of money. Bitcoin prices are down more than 18% this year.

Crypto fans have long argued that bitcoin and other digital currencies are better stores of value than the US dollar, the euro, yen and other “fiat currencies” because crypto isn’t subject to the whims of governments who can decide to print more money — and thus devalue the currency — when needed.

But the dollar, like gold, tends to thrive when investors are afraid. And make no mistake, traders are scared and the CNN Business Fear & Greed Index is now showing signs of Extreme Fear.

Gold prices have surged this year, rising about 8.5% in 2022, and it briefly topped $2,000 an ounce for the first time since August 2020. Next milestone in sight: The all-time high of above $2,060, also from the summer of 2020.

Gold, which had already been rallying before Russia’s invasion of Ukraine, is now benefiting from geopolitical turmoil as well as broader inflation fears. Gold often is viewed as a hedge against rising prices and a classic fear trade. Another precious metal, palladium, is also soaring. It hit a new all-time high Monday.

As long as oil prices continue to skyrocket, gold and other commodities may go along for the ride. The worry is that inflation could wind up turning into stagflation…an economic slowdown accompanied (and perhaps even caused) by soaring energy prices.

The rally in gold “reflects the nervousness…about stagflationary pressures,” said Hussein Sayed, chief market strategist at Exinity, in a report Monday morning. Sayed noted that in addition to the spikes in gold and palladium, the prices of aluminum, copper, zinc, corn, and wheat are surging too.

That, Sayed believes, “complicates the outlook for central banks across the globe.” The Federal Reserve is likely to raise interest rates at its next meeting later this month, but it has to be careful to not go too far and rattle already nervous investors and consumers.

Oil prices are surging — and it looks like Warren Buffett’s Berkshire Hathaway (BRK.B) is betting the energy boom will continue.

Berkshire Hathaway disclosed in a regulatory filing Friday that it now owns more than 91 million shares of Occidental Petroleum (OXY), about a 9% stake. Shares of Occidental Petroleum were up 5% in premarket trading Monday following a nearly 18% pop Friday.

Berkshire bought about 61 million of those shares just last week to add to the 30 million it already owned. And all of that is on top of Berkshire’s gives right to buy nearly 84 million more Occidental shares — part of a 2019 deal in which Berkshire invested $10 billion in Occidental to help the company buy rival Anadarko Petroleum.

Though Berkshire is stocking up, another major institutional investor is bailing on Occidental: Carl Icahn. In another SEC filing, Occidental noted that two directors on its board affiliated with Icahn decided to resign “effective immediately…in connection with the exit of the Icahn Group from its entire position in the Company’s common stock.”

Icahn was critical of Occidental’s Anadarko deal, which he called “misguided” after Occidental outbid rival Chevron for Anadarko.

US stocks were mixed Monday morning, rebounding off their premarket lows after oil prices soared to a 14-year high above $120 a barrel due to Russia’s invasion of Ukraine. More major Western companies, including streaming giant Netflix, are suspending business in Russia as sanctions from the US and Europe against the Vladimir Putin regime continue.

Stocks are tumbling on Monday as oil prices soared above $120 barrel to their highest level in 13 years, raising fears about an inflationary shock to the global economy.

European markets plunged in early trade. Germany’s DAX 30 (DAX) and France’s CAC 40 (CAC40) both fell by more than 3%. London’s FTSE 100 (UKX) was down nearly 2%. The sell-off followed big losses in Asia. Hong Kong’s Hang Seng Index (HSI) sank as much as 5% before closing down 3.9%, its worst daily drop in seven months. Japan’s Nikkei 225 (N225) tumbled nearly 3% and China’s Shanghai Composite (SHCOMP) dropped more than 2%.

The latest market turmoil came as US crude futures surged 6% to trade at $123 a barrel, the highest level since August 2008. Brent crude briefly spiked as high as $139 a barrel before easing back to $125, still up more than 6%.

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US stock futures tumbled Monday morning as the United States and Europe continued discussions about a Russian oil ban – sanctions that they had until recently shunned to insulate Western civilians from surging gas prices.

The discussions alone sent oil surging, and prices at the pump in the United States soared above $4 a gallon nationwide. Investors fear that dramatically high inflation could eat into companies’ bottom lines or even spark a recession.

American Express (AXP) is the latest credit card company to announce it is ending its operations in Russia as its invasion into Ukraine escalates.

On Sunday, the company said in a statement that globally issued American Express cards will no longer work in Russia, and cards issued in Russia won’t work outside the country.

American Express also said it is ending its business operations in Belarus.

“This is in addition to the previous steps we have taken, which include halting our relationships with banks in Russia impacted by the US and international government sanctions,” American Express said in a statement Sunday.

The average price for a gallon of regular gas hit $4 Sunday, the highest level since 2008. And with prices surging amid Russia’s attack on Ukraine, the record high of $4.11 per gallon set that year is likely to fall any day.

The AAA national average stands at $4.01, up 9 cents a gallon since Saturday’s reading, and up 47 cents, or 13%, since before Russia invaded Ukraine 11 days ago.

The daily weekend increases are larger than any one-day jump in price since Hurricane Katrina slammed the US Gulf Coast and damaged much of the nation’s oil and gas producing regions in 2005, sending prices soaring.

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