(Bloomberg) — The surge in energy prices fueled stock volatility amid an intensifying debate on whether inflation pressures will be transitory or derail the economy. Traders also assessed a news report that China is expanding its crackdown to banks.
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After swinging between gains and losses throughout most of the session, the S&P 500 headed toward its second consecutive drop, with volume 10% below the average of the past month. West Texas Intermediate crude climbed to a seven-year high, hovering near $81 a barrel. Aluminum jumped, while Chinese coal futures hit a record.
Investors have been on guard for what Chinese regulators may target next, with the government tightening its grip on sectors ranging from private education to digital gaming, property and insurance. Meantime, the rally in commodities has unsettled traders, with supply bottlenecks complicating the outlook for policy makers, who are seeking to balance the withdrawal of stimulus with concerns that growth may have peaked.
“Surging global energy prices along with higher interest rates have created additional angst among investors,” said Craig Johnson, technical market strategist at Piper Sandler & Co. We don’t believe price pressures and supply constraints “will offset constructive demand and growth trends. Earnings will be the next key test for the broader equity market,” he added.
The third-quarter earnings season kicks off this week, with results from financial firms. Investors are looking for signs that loan growth is starting to stage a comeback at the biggest U.S. banks. Executives have pointed to early indications that small businesses and individual consumers are taking on debt again after government stimulus checks depressed demand during the Covid-19 crisis.
Read: Guidance Could Be ‘Ugly’ This Earnings Season, BofA Says
Elsewhere, Bitcoin climbed above $57,000 for the first time since May. As in past rallies, a myriad of reasons are being cited for the surge — from an easing of concern about regulatory efforts in the U.S. and China, as well as renewed optimism about a possible Securities and Exchange Commission approval of a cryptocurrency exchange-traded fund.
Read: Some Evergrande Bondholders Haven’t Received Coupons Due Oct. 11
Here are a few events to watch this week:
Bank of Korea policy decision and briefing Tuesday
Atlanta Fed President Raphael Bostic speaks on inflation Tuesday
U.S. FOMC minutes and CPI Wednesday
China PPI, CPI Thursday
U.S. initial jobless claims, PPI Thursday
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
The S&P 500 fell 0.3% as of 2:47 p.m. New York time
The Dow Jones Industrial Average fell 0.4%
The MSCI World index was little changed
The Bloomberg Dollar Spot Index rose 0.3%
The euro was little changed at $1.1559
The British pound was little changed at $1.3607
The Japanese yen fell 1% to 113.33 per dollar
West Texas Intermediate crude rose 1.4% to $80.45 a barrel
Gold futures fell 0.1% to $1,755.30 an ounce
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