Energy prices were moving sharply lower on Tuesday, with the price of oil falling 3% to $59.51 a barrel in early trading. Energy prices have been steadily climbing this year until recently, as the global economy recovers and oil demand worldwide increases while production still remains constrained. The drop in oil prices could be attributed to some additional coronavirus lockdowns in Europe.
Marathon Oil was down 4%, Hess Corp. was down 2% and Occidental Petroleum was down 1.5%.
Another drop in long-term bond yields was pulling bank stocks slightly lower. Lower yields mean lower interest rates on loans such as mortgages, and weaker profits for banks. The KBW Bank Index of the 24 largest banks was down 0.3% in early trading.
The yield of the 10-year Treasury note fell to 1.65%. The yield was well above 1.70% last week, which had put some pressure on the stock market.
Investors continue to be focused on the future outlook for the U.S. economy as millions of Americans get vaccinated every day. Investors are wavering between optimism that coronavirus vaccines that might allow business and travel to return to normal and fears of higher inflation after struggling economies were flooded with credit and government spending.
Federal Reserve Chairman Jerome Powell said Thursday that while the economy was improving, a recovery is “far from complete.” In testimony to Congress, he said the Fed “will continue to provide the economy the support it needs for as long as it takes.”
Investors have been reassured by Powell’s comment earlier that the Fed’s key interest rate will be kept near zero through 2023 even as inflation is forecast to pick up.
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