Market Snapshot: Dow tumbles 400 points, down for a second day after historic plunge in oil prices
U.S. stocks traded lower Tuesday morning, on pace for second day of losses for the major benchmarks after a historic fall in oil prices, as investors parsed a fresh round of corporate earnings reports and monitored progress in Washington on further Congressional aid for businesses hit by the coronavirus pandemic.
The Dow Jones Industrial Average
fell 405 points, or 2.1%, at 23,150, the S&P 500 index
lost 47 points, or 1.7%, to trade at 2,775, while the Nasdaq Composite index retreated 155 points, or 1.8%, at 8,405.
What’s driving the market?
An historic slump in oil prices weighed on sentiment as investors worried that plunging demand for the commodity would dent a key sector for U.S. employment and investment and signals a deeply depressed global economy.
Tuesday’s action comes a day after West Texas Intermediate crude for May delivery
which expires at the end of the day’s trade, suffered fell $55.90 a barrel, or 306%, to settle in negative territory for the first time in history.
Even though the energy sector is relatively small compared to the market as a whole, big declines can undermine risk sentiment and spark worries about defaults in the oil-and-gas sector, adding to the likely recessionary environment created by the pandemic.
“The oil market is sending a bold warning that economic growth may not recover nearly as quickly as some equity investors would hope,” wrote Tom Essaye, president of the Sevens Report, in a Tuesday note to clients. “The S&P 500 is pricing a relatively quick return to a normal economy, and continued low oil prices are pushing back against that assumption.”
President Trump said in a tweet Tuesday morning that he’s instructed the Treasury secretary to craft a plan to provide financial aid to the oil and gas industry, “so these very important companies and jobs will be secured long into the future.”
The drama overshadowed efforts by some U.S. states, including Georgia, South Carolina, Tennessee and Texas to ease restrictions on businesses and consumers that were put into effect to combat the spread of COVID-19.
Investors were also tuned to a delay in a Congressional vote to provide further funds to U.S. small businesses hurt by the coronavirus pandemic, after a roughly $350 billion package was exhausted last week. A vote in the Senate on the package could come as early as later today, while the House would vote on Thursday at the earliest. The package is said to also include funds for hospitals and efforts to ramp up U.S. testing capacity.
Meanwhile, President Donald Trump via Twitter said he plans to sign an executive order temporarily suspending immigration into the U.S. “In light of the attack from the Invisible Enemy, as well as the need to protect the jobs of our GREAT American Citizens, I will be signing an Executive Order to temporarily suspend immigration into the United States!” the president tweeted, late Monday.
Trump offered no further details about such an immigration suspension. Due to the pandemic, almost all visa processing by the State Department, including immigrant visas, has been suspended for weeks anyway.
Markets were also keeping one eye on North Korea, amid speculation about a possible political upheaval brewing in the isolated nation after unconfirmed reports indicate that Kim Jong Un is fragile after recovering from heart surgery. The reports say Kim hasn’t made a public appearance since April 11.
“So succession risk is causing global equity markets to buckle,” wrote Stephen Innes, global chief market strategist at AxiCorp, in a daily research note on Monday.
In economic data, the National Association of Realtors said that existing home sales fell by 8.5% in March, due to coronavirus.
Which stocks are in focus?
In corporate news, International Business Machines Corp.
reported after Monday’s close that revenue declined in the first quarter amid the spread of COVID-19, and said it was withdrawing its annual forecast. Shares were down 5.1%.
Energy stocks were under pressure as oil prices plunged, with Occidental Petroleum Corp.
down 4.6% Tuesday Exxon Mobil Corp.
and Schlumberger NV
were also trading lower.
Dow component Travelers Companies Inc.
shares gained 1.8% after the insurer reported disappointing first-quarter results that it attributed to the COVID-19 epidemic, but raised its dividend from 82 cents per share to 85 cents.
How are other markets trading?
Oil futures remained under pressure Tuesday, with West Texas Intermediate crude for June
down 27.8%, or $5.71 to $14.78 per barrel
In precious metals, the price of an ounce of gold for June delivery
fell $18, or 1.1% to $1,692.
The yield on the 10-year U.S. Treasury note
was down about 8 basis points to 0.55%.
Globally stocks were under pressure, with the Stoxx Europe 600
down 2.6%. In Asia, stocks closed lower Tuesday, with the China CSI 300
losing 1.2%, Japan’s Nikkei 225
falling 2% and Hong Kong’s Hang Seng index