High gas prices are sending stocks lower. Is it time to buy or sell?

Gas prices in the U.S. are inching closer to record highs as the U.S. moves toward a ban on Russian oil.

That's triggering a drop in stock prices.

The Dow Jones Industrial Average shed nearly 800 points, or 2.4%, on Monday. The S&P 500 and NASDAQ Composite also closed lower, by 3% and 3.6%, respectively.

But now may not be the best time to go on a stock shopping spree. That's because prices may slide even further amid a heightened state of uncertainty, says Eric Freedman, the chief investment officer at U.S. Bank. 

Over the weekend Secretary of State Antony Blinken said the U.S. and its allies are in talks to ban Russian oil imports, a move that would require successful efforts to provide an "appropriate supply of oil on world markets." Russia supplies about 30% of Europe's oil and 40% of its natural gas.

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Stock losses mounted on Monday as the U.S. considers banning Russian oil. The NASDAQ Composite saw the biggest losses

Buying the stock market dip

Fears are mounting that sanctions on Russia could backfire in the U.S. and stunt economic growth. That would have more of a direct impact on U.S. stocks than what investors are seeing.

But markets have largely priced in the risks of a Russian invasion of Ukraine and U.S. actions that could follow, Freedman said, adding that “some of the worst-case scenarios at least seem to be on the back burner just for now.” 

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So if you’re looking for an opportunity to buy stocks that are falling in price, known as “buying the dip,” you may want to consider holding out. “The store will remain open for a couple of months,” Freedman told USA TODAY. “But if one is sitting on a bunch of cash, could you put a little bit to work here? Yes, but we would not be aggressive in this environment.” 

Investors should look out for “dividend aristocrats”, or companies that have above-average earnings and dividend growth “for an extended period of time," said Sam Stovall, chief investment strategist at CFRA.

“Everything essentially gets thrown out with the bathwater in a market decline,” he said, explaining why it’s a good idea to consider high-performing dividend stocks during a widespread selloff. 

Consequences of Russia-Ukraine war

It’s also important to bear in mind that the Russia-Ukraine conflict may not “end up roiling the global economy,” said Callie Cox, U.S. investment analyst at eToro. “The U.S. doesn’t rely on Russia as a top trade partner, and the fear of commodity trade disruption may be overdone,” she said, referring to oil and gas prices.

That said, crude oil prices settled at nearly $120 a barrel while Brent crude settled above $123 a barrel on Monday. That's the highest both have been since 2008.

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At the pump, Americans are paying $4.07 for a gallon of regular gas on average, according to AAA data. $4.11 is the highest average price Americans have ever paid for a gallon of regular gas, which occurred in July of 2008.

She added, “history shows that geopolitical threats often have more impact than the event itself.”

Cox pointed out that in 2014 the S&P 500 stock index lost 6% of its value over fears that Russia would occupy Crimea. Then, two weeks before Russia officially occupied the region “the market bottomed out.” After that the index went shifted into bull territory, hitting record highs on several occasions in the weeks that followed.

As it stands, the S&P 500 is down 12.4% from its peak in early January.

“When the market fears the worst, it’s often a sign that we’ve turned a corner,” Cox said. The same could prove true for the current conflict. 

Fed prepares to raise interest rates

It would better serve investors to pay more attention to the Federal Reserve’s monetary policy, analysts told USA TODAY.

Last week, Fed Chairman Jerome Powell signaled the central bank intends to raise its key interest rate by 25 basis points this month. 

“There's a risk that they're actually going to be hiking into a weakening economy,” Freedman said. “That tends not to bode well for equity investors,” he added, referring to stocks.