Wall St falls as oil surge stokes inflation fears; Russell 2000 slips

By Johann M Cherian and Utkarsh Hathi

March 19 (Reuters) – Wall Street’s main indexes fell on Thursday as a surge in crude prices revived inflation fears and the Federal Reserve’s cautious stance on interest rate cuts weighed on sentiment.

The rate-sensitive Russell 2000 index dropped 0.4%, having briefly touched a 10% loss from its all-time intraday high earlier in the session. An index falling 10% or more below its record high on a close-to-close basis is called a correction.

A strong forecast from Micron Technology did little to uplift sentiment, with its shares dropping 4.4%, as investors mulled the chip company’s higher spending plans given elevated borrowing costs.

Other memory chip stocks that have rallied this year were also knocked down. SanDisk and Applied Digital fell more than 2% each, while AI leader Nvidia dipped 1.5%.

Brent crude prices hovered around $112 a barrel after Iran attacked energy facilities across the Middle East in retaliation to Israel’s strike on its South Pars gas field. The U.S. benchmark, however, was trading at its widest discount to Brent in 11 years due to releases from U.S. strategic reserves and higher freight costs.

The Fed left rates unchanged on Wednesday and Chair Jerome Powell flagged higher inflation ahead. He added it was too soon to gauge the repercussions of the war on the economy and stuck to the prior forecast of one 25-basis-point rate cut this year.

“Oil prices are now driving not just stock prices, but Federal Reserve policy, and while this may be a short-term phenomenon, it’s the one the market is dealing with right now,” said Dennis Follmer, chief investment officer at Montis Financial, in a note.

Morgan Stanley joined Goldman Sachs and Barclays in pushing back its forecast for an interest rate cut to September from June. Traders are no longer pricing in a rate cut for this year and LSEG-compiled data now points to a dovish move only in mid-2027.

At 10:04 a.m. ET, the Dow Jones Industrial Average fell 218.84 points, or 0.45%, to 46,017.96, the S&P 500 lost 32.62 points, or 0.49%, to 6,592.08 and the Nasdaq Composite lost 148.57 points, or 0.67%, to 22,004.27.

Wall Street’s fear gauge, the CBOE volatility index, spiked 0.79 points to 25.88. The Middle East conflict has exacerbated volatility in global markets, but U.S. stocks have been buoyed by a rebound in technology shares and on relief that the U.S. is a net energy exporter.

Stocks and bonds slid following the Fed verdict and all the three main indexes are trading below their 200-day moving averages (DMA). The 200-DMA is a technical indicator reflecting long-term momentum.

Eight of the 11 S&P 500 sector indexes were in the red, with materials leading declines with a 2.2% drop. Prices of precious metals fell, with miners Newmont and Freeport-McMoRan dropping 8.7% and 7.5% respectively.

Energy price-sensitive travel stocks such as Delta Air and United fell more than 1%, while cruise stocks such as Norwegian and Carnival were down 0.5%.

Investors will be keen on any potential commentary from policymakers later in the day.

Meanwhile, weekly jobless claims unexpectedly fell last week, pointing to stable labor market conditions and a rebound in job growth in March.

Also in focus will be a U.S.-Japan summit that President Donald Trump may use to press for help on the war in Iran after his earlier call on allies to safeguard passage through the strategic Strait of Hormuz went unanswered.

Declining issues outnumbered advancers by a 2.17-to-1 ratio on the NYSE and by a 2.02-to-1 ratio on the Nasdaq.

The S&P 500 posted 11 new 52-week highs and 17 new lows while the Nasdaq Composite recorded 18 new highs and 181 new lows.

(Reporting by Johann M Cherian and Utkarsh Hathi in Bengaluru; Editing by Devika Syamnath)