At close on Wednesday, the Dow Jones Industrial Average dropped some 448.96 points (1.3%), while the S&P 500 declined around 1.2% and the Nasdaq Composite fell approximately 1.3%.
The dips come days after Jerome Powell, chairman of the US Federal Reserve System, said the government's central bank was prepared to increase interest rates by half-percentage-point increments, to reel in inflation.
While Tuesday's market close did not appear to reflect a potential rise in interest rates, indexes slumped on Wednesday after observing a rise in the price of Brent crude, a waterborne crude oil used as the international benchmark for much of the world's oil.
Brent crude rose $6.12 a barrel (5.3%) to $121.60, amounting to the third-highest settlement value of the year, according to the Wall Street Journal. Overall, Brent crude has surged 56% in 2022.
In this Dec. 1, 2020, file photo, Chairman of the Federal Reserve Jerome Powell speaks during a Senate Banking Committee hearing on Capitol Hill in Washington.
© AP Photo / Susan Walsh
West Texas Intermediate (WTI) crude, the US oil benchmark, also saw a 5% gain, amounting to almost $115 a barrel.
"It’s very difficult to try to gauge how the higher interest rates will impact inflation, the economy and earnings growth, and then you add on top of it a war that’s constraining oil," Jack Ablin, chief investment officer for investment firm Cresset Capital, told CNBC.
As energy stocks rallied, Hess and Diamondback Energy were the top gainers at the S&P 500's close, respectively rising 4.6% and 3.9%.
While the S&P 500 has recouped some losses since the beginning of the Kremlin's special military operation in Ukraine, fears of a possible economic downturn remain, particularly as yields on long-term US government bonds slip below yields on short-term bonds. The rare occurrence, known as an "inversion," similarly sounded alarms for financial experts in 2018.
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