FX.co ★ Record rise in commodity prices puts pressure on U.S. stock market

The incredible rise in commodity prices led to another fall in U.S. and European stock indices. The S&P 500 and Nasdaq 100 contracts fell more than 1%, while European futures fell 2.7%.

A fall in the S&P 500 to 3,670 is not planned but cannot be ruled out, said Julian Emanuel, chief equity strategist at Evercore ISI, referring to the idea that the Federal Reserve could take steps to help stabilize the markets.

U.S. stocks and futures sold off on Monday, while safe havens including gold and Treasuries surged.

Fed Chairman Jerome Powell pointed out last week that the U.S. economic recovery is resilient enough to weather a range of challenges, with many confident that the S&P 500 will bounce back to 5,000 in 2023.

Today, WTI oil reached $130 per barrel, while gold tested $2000.

Secretary of State Antony Blinken on Sunday said that the U.S. and its allies are considering a coordinated embargo following Russia's invasion of Ukraine. High energy prices threaten to halt global growth.

Grains, metals, and natural gas also rose on fears of chaos in commodity flows due to the invasion and sanctions against Russia, which turn it into a global pariah. Commodity currencies such as the Australian dollar have strengthened.

The global economy was already struggling with high inflation due to the effects of the pandemic. The Federal Reserve and other key central banks now face the daunting task of tightening monetary policy to contain the cost of living without disrupting economic expansion or raising risky assets.

"For the U.S. economy, we now see stagflation, with persistently higher inflation and less economic growth than expected before the war," Ed Yardeni, president of Yardeni Research, wrote in a note. "For stock investors, we think 2022 will continue to be one of this bull market's toughest years."

The Swiss franc retreated against the dollar after a member of the board of the Swiss National Bank said he was ready to intervene to deal with the rapid strengthening.

Here are some key events this week:

• Apple new product event, Tuesday
• EIA Crude Oil Inventory Report, Wednesday
• China Aggregate Financing, PPI, CPI, Money Supply, New Yuan Loans, Wednesday
• Reserve Bank of Australia Governor Philip Lowe speech, Wednesday and Friday
• European Central Bank President Christine Lagarde briefing after policy meeting, Thursday
• U.S. CPI, Initial Jobless Claims, Thursday