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Wall Street returns from the Memorial Day holiday.

Angela Weiss / AFP via Getty Images

Stocks were falling Tuesday, as oil prices gained after Europe placed more restrictions on Russian oil.

Shortly after the open, the

Dow Jones Industrial Average

retreated 384 points, or 1.2%, while the

S&P 500

decreased 1.2%. The

Nasdaq Composite

was down 1.3%.

The price of oil jumped 3.2% to more than $ 118 a barrel, a level it hasn’t seen since early March, when it became clear that Russia was launching a full invasion of Ukraine. The move comes after the European Union said it would impose an oil embargo on Russia, which would include the vast majority of Russian oil imports by the end of the year. Pipeline exports of oil, specifically, will continue.

Higher oil prices could mean trouble for the stock market. If the price of oil stays elevated, it could bring inflation up slightly. High inflation has already been a problem, as companies have seen higher costs and falling profit margins, forcing them to lift prices, a threat to consumer demand. The latest inflation result in the US showed that the rate of price increases is declining, and higher oil could get in the way of the progress.

The other issue is that the Federal Reserve is trying to combat inflation by lifting short-term interest rates, a move that is likely to dent economic growth. The Fed recently implied that it could slow down the pace of rate hikes as the economy slows, so markets do not want to see evidence that the pace of rate hikes will be on the faster side.

As if to reinforce this point, Fed Governor Christopher Waller said he was willing to raise rates above the so-called neutral rate if it meant getting inflation heading back to 2%. “Waller took back the punchbowl from the one week reprieve equity and bond markets had last week,” wrote NatAlliance Securities’ Andrew Brenner.

What’s more, concerns about inflation, the Fed, oil prices, and the like — what are known as macroeconomic factors — are likely to have a bigger impact on day-to-day stock market moves now that earnings season is over. That’s because investors will be left to guess how these factors will impact corporate profits for the next couple of months, rather than having companies tell them how these forces are impacting them.

“Macroeconomic cross currents remain high, and uncertainty about the path of inflation, policy, and growth is elevated,” wrote Dennis DeBusschere, founder of 22VResearch. “For now, that means… market volatility tied to major macro releases and Fed meetings.”

The good news is that the broader market’s pain this year seems to be subsiding, overall. To be sure, the market is down Tuesday, but the decline doesn’t look worrisome. The S&P 500 is still well above its intraday low for the year, which it hit May 20. More buyers seem to be coming back into the market. “Strong market internals generated several ‘breadth thrust’ signals that should have us open minded that stocks are building bases,” wrote John Kolovos, chief technical strategist at Macro Risk Advisors.

One of those strong signals: the majority of S&P 500 stocks have just begun to rise back to key levels. Abut 86% of stocks on the index are above their 20-day moving averages, according to Instinet. That means that most stocks are trading at higher price levels, as the market becomes slightly more confident in future gains.

But one thing is clear for now: the stock market isn’t out of the woods yet. The indexes are still down double digits in percentage terms for the year an still sensitive to ominous macro developments.

Outside the US, China began lifting some Covid restrictions, helping the

Shanghai Composite

gain 1.2%, while Tokyo’s Nikkei 225 ended 0.3% lower. The pan-European

Stoxx 600

has fallen 0.6%.

Here are five stocks on the move Tuesday:

The easing of China’s Covid-19 restrictions has seen a rally in Chinese stocks — including a number of US-listed Chinese tech companies.


(ticker: BABA) jumped 3.8%, with e-commerce peer


(JD) 5.8% higher. Electric-vehicle maker


(NIO) rallied 3.4%.


(UL) surged 8.2%, after the consumer-products company said it appointed billionaire investor Nelson Peltz as a nonexecutive director and confirmed his Trian Fund Management holds a roughly 1.5% stake in the group.

Zoom Video Communications

(ZM) stock slipped 2% even after getting upgraded to Outperform from Underperform at Daiwa Securities.

Bob Doll of Crossmark Global Investments discusses how much more stocks need to fall before reaching the bottom, while Dana Peterson of The Conference Board previews the May jobs report.

Write to Jack Denton at jack.denton@dowjones.com and Jacob Sonenshine at jacob.sonenshine@barrons.com

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