US stocks climb back up after day of steep slides

Volatile day showed stress over pandemic, inflation, Ukraine-Russia tensions and a Fed meeting

Monitors display stock market information at the Nasdaq MarketSite in New York, US, on January 21, 2022. Bloomberg

After its worst week since 2020, Wall Street on Monday ended a volatile day of a multi-session selloff fuelled by geopolitical tensions over Ukraine and tighter Federal Reserve policy with stocks reaching modest gains.

The late-afternoon comeback pulled the S&P 500 out of so-called correction territory — a drop of 10 per cent or more from its recent high.

The S&P 500 ended 0.3 per cent higher after having been down about 4 per cent.

The tech-heavy Nasdaq index rose 0.6 per cent after recovering from a nearly 5 per cent descent.

The benchmark Dow Jones Industrial Average rose 0.3 per cent after sinking 2.9 per cent.

The near four-month losses seen earlier in the day came ahead of a two-day Fed meeting beginning on Tuesday where policymakers are expected to set the stage for raising the lending rate in March.

Traders believe borrowing costs will increase even as riskier assets tumble. Swap markets show a quarter-point hike in March and close to a full percentage point rise for the whole of 2022.

Loose Fed policy has played a role in major gains by Wall Street indices over the past two years even as the Covid-19 pandemic caused widespread economic pain, but Chair Jerome Powell and other officials have made clear they are ready to end that to rein in rampant US inflation.

"The markets remain on edge regarding the ultimate economic impact of elevated expectations that the Fed may have to aggressively tighten monetary policy to combat persisting inflation pressures," investment bank Charles Schwab said.

In tech, Netflix was down 2.6 per cent after plummeting 10 per cent, adding to its losses suffered last week after reporting lacklustre growth in subscribers to the streaming service that saw a surge in interest during the pandemic. Tech giants Apple and Microsoft are due to report earnings in the next few days.

Traders work on the New York Stock Exchange floor on January  21, 2022. AP

Also on traders' minds is the possibility of a Russian invasion of Ukraine, after the US, Britain and Australia ordered diplomats' families to leave the capital Kyiv amid soaring tensions over Russia's deployment of some 100,000 troops at its neighbour's borders.

Europe’s STOXX 600 index closed down 3.6 per cent on concerns about Fed tightening and the situation around Ukraine. The Russian ruble has also fallen.

Brent crude fell $1.62, or 1.8 per cent, to $86.27 a barrel by midday, while US West Texas Intermediate crude dropped $1.83, or 2.2 per cent, to $83.31.

Both benchmarks rose for a fifth week in a row last week, gaining about 2 per cent to reach their highest since October 2014.

"Big picture, we believe oil is going higher over the long run, but short-term we've gotten overbought and juiced up on geopolitical risk," said Mr Flynn.

News agencies contributed to this report

Updated: January 24, 2022, 10:54 PM