Oil Prices Depress Stocks, End Notion of Interest Rate Cuts

Another climb for oil prices shook stock markets on Friday, as hopes collapsed for a possible cut to interest rates this year by the Federal Reserve.

• The Dow fell 443.96 points, or 1%, to 45,577.47, ending the week down 2.1%.
• The S&P 500 fell 100.01 points, or 1.5%, to 6,506.48, down 1.9% for the week.
• The Nasdaq fell 443.08 points, or 2%, to 21,647.61, closing the week 2.1% lower.

Brent crude, the international standard, rose 3.3% to settle at $112.19 per barrel. Benchmark U.S. crude gained 2.3% to $98.32 per barrel.

Stocks also bent under the weight of leaping yields in the bond market, the AP reports. Higher yields make mortgage rates and other borrowing more expensive for US households and companies, slowing the economy, and they grind down on prices for all kinds of investments. Treasury yields have been jumping on worries the war with Iran will cause a long-term spike in oil and natural gas prices that drives up inflation. Worries have gotten so high that traders have canceled nearly all their bets that the Federal Reserve could cut interest rates this year, according to data from CME Group. Some even think the Fed could raise rates in 2026, a nearly unthinkable scenario before the war began.

"I think it would be market shaking," Ann Miletti of Allspring Global Investments said about a rate hike. But she also said that if oil prices stay high for long, they would likely drag so much on the economy that the Fed would not raise rates. Lower interest rates would give the economy and investment prices a boost, and they're something President Trump has angrily been calling for. Before the war, traders were betting heavily that the Fed would cut rates at least twice this year. On Friday, Super Micro Computer lost a third of its value and tumbled 33.3% to help drag the stock market lower. The federal government has accused a senior vice president of the company and two others affiliated with it of conspiring to smuggle billions of dollars of computer servers containing advanced Nvidia chips to China.

Roughly three out of every four stocks in the S&P 500 fell. Stocks of smaller companies, which can feel the pinch of higher interest rates more than their bigger rivals, led the way lower. The Russell 2000 index of smaller stocks fell a market-leading 2.3%. Among the few winners was FedEx, which rose 0.8% after delivering a much stronger profit for the latest quarter than analysts expected.