Invariably, after demonstrating resilience amid banking sector woes, all investors seemingly had the same question: Why are stocks down today? Fundamentally, oil prices spiked northward due to a surprise coordinated production cut. A decline in available employment opportunities also pointed to a hard landing for the economy as the Federal Reserve attempts to curb inflation. And, as always, politics may once again rear its ugly head.
First, it’s worth explaining the key element undergirding the inquiry, why are stocks down today? At the beginning of the week, the alliance between the Organization of the Petroleum Exporting Countries (OPEC) and non-member oil-producing nations — known as OPEC+ — imposed shock production cuts on Sunday. The cuts totaled 3.66 million barrels per day (bpd) or 3.7% of global demand.
Mainly, the concern here centers on the Fed’s response to the crisis. At the moment, many traders believe that the central bank will not raise interest rates in May. However, others believe that policymakers must concentrate on containing stubbornly high inflation. If so, the Fed may have no choice but to hike rates as oil production cuts are inflationary; that is, more dollars will chase after fewer goods.
Why Are Stocks Down Today? Jobs, Jobs, Jobs.
Another factor that explains why stocks are down today focuses on the labor market. Specifically, CNBC reported that in the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS), available positions totaled 9.93 million. This tally represented a drop of 632,000 from January’s downwardly revised number.
The news agency mentioned that it was the first time vacancies had fallen below 10 million since May 2021.
“The labor market is starting to loosen as the number of job openings declined in most sectors. As the economy slows, firms will likely cut openings and workers will be less likely to quit in search of better hours and higher pay,” said Jeffrey Roach, chief economist at LPL Financial.
Roach added, “[t]he Fed could consider pausing rate hikes at the next meeting but only if the upcoming employment report shows signs of material weakness and the March [consumer price index] report reveals lower inflation.”
However, the OPEC+ production cuts imposed an unexpected wrinkle to monetary policy.
Why It Matters
Finally, the unprecedented arraignment of former President Donald Trump may have contributed to the stock market’s jitters. As Barron’s Ben Levisohn pointed out, the legal drama surrounding Trump may only exacerbate the animosity between Democrats and Republicans. Therefore, key issues that require cooperation — such as the debt ceiling — may become more challenging to address.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
