WTI crude oil prices fell 2.36 percent on Wednesday, marking the worst single-day drop in two weeks. The deterioration in energy prices was not an isolated event. A closer look at an intraday chart shows that oil prices fell alongside the S&P 500, which dropped the most in one month. This is as traders bought Treasuries, pushing prices up as yields came down in a flight to safety.
Risk aversion struck markets in the wake of softer-than-expected United States retail sales and wholesale inflation figures. This also caused markets to adjust monetary policy expectations. Now, Fed Funds Futures have almost fully priced out 2 rate hikes this year in favor of just a 25-basis point increase. Then, rate reductions are seen later in 2023. This continues to diverge from policymakers’ projections.