U.S. stocks were mixed on Monday, though shares of energy producers enjoyed a lift, as investors reacted to a surge in oil prices after a surprise production cut was announced by Saudi Arabia and its allies.
- The Dow Jones Industrial Average DJIA,
+0.75%rose 240 points, or 0.7%, to 33,514.
- The S&P 500 SPX,
+0.01%was up only 2 points at 4,112.
- The Nasdaq Composite COMP,
-0.90%was down 94 points, or 0.8%, at 12,128.
Last week, the Dow rose 3.2%, while the S&P 500 advanced 3.5% and the Nasdaq Composite gained 3.4%. The Dow eked out a 0.4% quarterly rise for the first three months of 2023, while the S&P 500 rose 7% for its biggest quarterly gain since the final three months of 2021, and the Nasdaq surged 16.8% for its biggest jump since the second quarter of 2020.
What’s driving markets
Oil futures CL.1,
The Financial Times reported the Saudis were upset after the White House said that it had no plans to refill the U.S. Strategic Petroleum Reserve.
Read: Trigger for Saudi oil production move was comment that U.S. would not refill SPR this year, report says
The OPEC+ announcement “is giving the market a lot of anxiety because it’s another wrench in the works,” said Derek Tang, an economist at Monetary Policy Analytics in Washington. “After the recent bank turmoil, people were thinking that the Fed might be done with hiking rates and might start cutting soon. But if inflation is higher, its harder for them to stop hiking and start easing.”
That’s making “the picture muddier and weighing on people’s willingness to take on more risk,” Tang said via phone.
The yield on the 1-month T-bill rate jumped 19 basis points to 4.67% as traders factored in a more than 50% likelihood of another quarter-point rate hike by the Federal Reserve in May. Meanwhile, the yield on the policy-sensitive 2-year Treasury note
fell 6 basis points to 4% as traders also weighed the economic outlook. Yields and debt prices move opposite each other.
The jump in oil prices might make the Federal Reserve’s inflation-fighting job “a little more difficult,” but it is too soon to know for sure, St. Louis Fed President James Bullard said in a Bloomberg Television interview.
The surge in crude prices was a boon for shares of energy producers. The Energy Select Sector SPDR ETF XLE,
Chevron Corp. CVX,
Read: Energy ETFs jump after OPEC+’s unexpected oil-production cut, soaring past S&P 500 in Monday trade
In Monday’s data releases, the Institute for Supply Management said its March manufacturing index dropped to 46.3% from 47.7% a month earlier. That’s the lowest level since May 2020, when the pandemic show down much of the U.S. economy. Numbers below 50% signal that the manufacturing sector is contracting. The last time the index fell five months in a row was in 2019, during a trade fight with China. Economists polled by The Wall Street Journal had expected the index to come in at 47.3%.
“There are a lot of peripheral existential risks to the market competing against the potential for cash to come in and create a momentum bull market,” said Phil Toews, chief executive of Toews Corp. in New York. Those risks include emerging “challenges” in the banking sector and continued high valuations for stocks, he said via phone.
Companies in focus
- Tesla Inc. TSLA,
-6.31%shares fell 5.9% after the electric-vehicle maker said on Sunday that it had delivered 422,875 vehicles in the first quarter, shy of the 432,000-unit number that analysts tracked by FactSet had been projecting on average. Tesla also reported production of 440,808 units for the quarter.
- Shares of Endeavor Group Holdings Inc. EDR,
-7.65%were off 6.9% after the parent of the mixed martial-arts organization UFC said it had agreed to combine with World Wrestling Entertainment WWE, -3.97%to form a new publicly listed company with a combined enterprise value of $21.4 billion. WWE shares were down 5.2%.
— Steve Goldstein contributed to this article.