“The COVID recovery was in full bloom in the jobs report,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments.
“The tricky part is the future, not the past,” he said, as crude oil prices climbed back above $112 per barrel and wheat prices in the U.S. climbed another 6.6% amid worries about pressure on supplies because of the Ukrainian war. “Higher fuel and food costs can eat into consumers’ budgets. Those high costs can be a boon for oil producers and farmers, but not for everyone else.”
Such concerns helped drag the Dow Jones Industrial Average down 269 points, or 0.8%, to 33,525, as of 10:00 a.m. Eastern time. The Nasdaq composite was 0.8% lower.
In Europe, whose economy is much more closely tied to the conflict because of its dependence on oil and natural gas from the region, losses were sharper. France’s CAC 40 fell 3.9%, Germany’s DAX lost 3.7% and the FTSE 100 in London fell 2.6%.
Russian forces gained ground, shelling Europe’s largest nuclear power plant and sparking a fire early Friday as they pressed their attack on a crucial energy-producing Ukrainian city. But authorities said the blaze was safely extinguished. U.S. Energy Secretary Jennifer Granholm tweeted that the Zaporizhzhia plant’s reactors were protected by robust containment structures and were being safely shut down.
Trading on the Moscow exchange, after briefly opening Monday, has remained closed throughout the week. Russia’s ruble lost another 2.5% against the U.S. dollar and dropped below 0.9 cents. It now takes 112.80 rubles to get a dollar, up from fewer than 75 at the start of the year. The ruble has plunged since Western governments imposed sanctions that cut off much of Russia’s access to the global financial system.
The euro has also sunk with the conflict raging on the continent, and it fell another 1.4% Friday to $1.091.
Stocks had rallied in the middle of the week after Federal Reserve Chair Jerome Powell said he favored a more modest increase to interest rates later this month than some investors had feared. The Fed is set to raise rates for the first time since 2018 to help rein in the highest inflation in 40 years, though it has a tightrope walk ahead as it tries not to raise so much as to cause a recession.
Powell warned Thursday that the fighting in Ukraine is likely to further magnify the high inflation troubling world economies. Russia is a key oil producer and prices have been rising as global supplies are threatened by the conflict, raising concerns that persistent inflation could become even hotter.
Global supply chains already were disrupted by the pandemic and the conflict in Ukraine will have ripple effects way beyond Europe, Tim Uy of Moody’s Analytics said in a report.
“The United States, for example, does not rely on direct energy imports from Russia or the Ukraine, but does have significant indirect energy exposure through the goods and services it imports from Europe and Asia that are produced using Russian energy,” the report said.
The Fed and other central banks face the high-risk challenge in raising interest rates enough to cool price pressures without triggering another recession.
“For a world that was already grappling with worryingly high (cost-push) inflation before Ukraine’s invasion, the surge in commodity prices from the geo-political spill-over is not merely an inconvenience, but rather a binding economic threat,” Mizuho Bank said in a commentary.
