Wall Street set for worst quarter since pandemic crash of 2020

U.S. stocks edged lower on Thursday on worries about the raging conflict in Ukraine and the outlook for U.S. interest rate hikes, putting the main indexes on course for their worst quarter since the pandemic crash in 2020.

Optimism around the peace talks this week faded as Ukrainian forces prepared for fresh Russian attacks in the southeast region.

The United States imposed new Russia-related sanctions, while Russian President Vladimir Putin signed a decree saying foreign buyers must pay in roubles for Russian gas from April 1.

The war-induced surge in commodity prices has amplified inflation worries, while a more hawkish Federal Reserve stoked growth concerns, pushing the three main U.S. indexes toward their worst quarter since March 2020.

The benchmark S&P 500 index, however, has rebounded more than 5% this month on upbeat economic data and a recovery in megacap stocks.

Investors are awaiting jobs report on Friday for clues on labor market strength and wage growth.

Data on Thursday showed U.S. consumer spending slowed significantly in February, while price pressures continued to mount, with inflation posting its largest annual gain since the early 1980s.

Another set of data showed jobless claims increased more than expected in the week ended March 26.

"Consumer spending was weaker than expected. And inflation number...continues to show it is certainly a real issue. Those two numbers combined are probably weighing on the market," said Eric Diton, president and managing director of the Wealth Alliance.

"The Fed is not going to need to hike rates as much as a lot of people think because...inflation, specifically more expensive gasoline and food and rent, and higher mortgage rates, are all going to dampen consumer spending."

Defensive sectors such as real estate, healthcare and utilities gained in mid-day trading,

along with commodity-linked energy and material sectors.

The S&P energy index was set to record its best quarter ever as oil prices jumped to multi-year highs on concerns over tighter supplies due to the war and Western sanctions on Russia.

At 12:05 p.m. ET, the Dow Jones Industrial Average was down 133.06 points, or 0.38%, at 35,095.75, the S&P 500 was down 11.39 points, or 0.25%, at 4,591.06, and the Nasdaq Composite was down 46.78 points, or 0.32%, at 14,395.49.

U.S.-listed shares of Baidu fell 6.5% after the Chinese search engine giant said it was exploring options after it was added to a U.S. securities regulator's list of companies facing the risk of being delisted. Its streaming affiliate iQIYI dropped 8.6%.

Drugstore chain Walgreens Boots Alliance fell 4.8% after the company kept its 2022 forecast of low-single digit earnings growth unchanged.

Advancing issues outnumbered decliners by a 1.25-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.10-to-1 ratio on the Nasdaq.

The S&P index recorded 53 new 52-week highs and three new lows, while the Nasdaq recorded 46 new highs and 67 new lows.