Wall Street refocuses on risk as stocks dip, oil climbs

US stock indexes were generally weaker on Monday, giving back some of last week's gains, and oil prices jumped as investors refocused on risk as the conflict in Ukraine continued.

The Dow Jones Industrial Average fell 186.13 points, or 0.54 per cent, to 34,568.8 and the Nasdaq Composite dropped 4.79 points, or 0.03 per cent, to 13,889.04, while the S&P 500 was virtually flat.

Boeing shares fell by around 4 per cent after one of its 737 jets crashed in China.

Global stocks rallied last week in anticipation of an eventual peace deal on Ukraine, but it will likely take actual progress to justify further gains.

Turkey's foreign minister said on Sunday that Russia and Ukraine were nearing agreement on "critical" issues and he was hopeful for a ceasefire if the two sides did not backtrack from progress achieved so far.

On Monday, Ukraine defied a Russian ultimatum that its forces lay down arms before dawn in Mariupol, while the European Union was set to consider a possible energy embargo against Russia.

"The coming days will be a litmus test on whether last week's risk-on rally was overdone. Hopes related to a peaceful resolution in Ukraine have relied on headlines more than evidence," said ING's Francesco Pesole and Chris Turner.

The MSCI world equity index was 0.05 per cent higher as of 1540 GMT. European shares were choppy with the pan-regional STOXX 600 benchmark up 0.21 per cent.

The war in Ukraine, surging commodity prices, supply chain issues and policy tightening have all made investors less upbeat about the prospects for global earnings growth.

BofA's global fund manager survey last week had a bearish bias with cash levels the highest since April 2020 and global growth expectations the lowest since the financial crisis of 2008. Long oil and commodities were the most crowded trade, and vulnerable to a pullback.

Bond investors braced for more hawkish language from the US Federal Reserve with Chair Jerome Powell speaking on Monday and other Fed members through the week.

Policymakers have flagged a string of rate rises ahead to take the funds rate to anywhere from 1.75 per cent to 3.0 per cent by the end of the year. The market 0#FF: implies a 50-50 chance of a half point hike in May and an even greater chance by June.

Atlanta Federal Reserve Bank President Raphael Bostic said on Monday he had pencilled in a total of eight interest rate hikes for this year and the next, fewer than most of his colleagues as he worries about the effects of Russia's invasion of Ukraine on the US economy.

The yield on benchmark 10-year Treasury notes rose to 2.2445 per cent, while the yield on two-year notes increased to 2.03 per cent. It was the first time since May 2019 that the two-year note, which typically moves in step with interest rate expectations, topped 2 per cent - the Fed's target rate for inflation.

Morgan Stanley rate strategists are calling for the closely watched 2-year/10-year US Treasury yield curve to invert in the second quarter. "While this doesn't guarantee a recession, the signal on growth is clearly negative," they wrote in a note.

The dollar was little changed versus a basket of major currencies, as investors looked toward Fed official comments for insight on monetary policy.

The dollar index steadied at 98.21, off its recent peak hit earlier in March at 99.415. The euro was flat at $1.104, after surging 1.3 per cent last week.

In commodity markets, gold has failed to get much of a lift from safe-haven flows or inflation concerns, losing more than 3 per cent last week. It was last up 0.6 per cent on Monday at $1,933.44 an ounce.

Oil prices pushed higher on Monday, after losing ground last week, as there was no easy replacement for Russian barrels in a tight market.

Brent LCOc1 jumped 5 per cent to $113.38, while US crude CLc1 rose 4.47 per cent to $109.38 a barrel after news the EU was considering joining the United States in a Russian oil embargo, while a weekend attack on Saudi oil facilities caused jitters.