Stocks Sell Off Amid Historic Drop in Crude Oil……

U.S. stocks finished solidly lower, as the recent optimism of some light at the end of the tunnel on the timing of the reopening of the U.S. economy was met with a historic plunge in crude oil prices. The May contract for crude, which expires tomorrow, plummeted into negative territory for the first time in history, while the June contract posted a marked loss as well, but to a far lesser extent. Additionally, hopes of U.S. lawmakers agreeing to further funding for small businesses after the Paycheck Protection Program (PPP) dried up last week were somewhat dashed as a deal remains elusive. Treasury yields were lower amid a dormant economic calendar, and as bond prices rose, while the U.S. dollar ticked higher and gold gained ground. In equity news, United Airlines preliminarily reported a larger-than-expected Q1 loss, and DuPont guided Q1 earnings well ahead of forecasts and suspended its yearly forecasts. Europe reversed course to finish mostly higher, while markets in Asia were mixed.

The Dow Jones Industrial Average fell 592 points (2.4%) to 23,650, the S&P 500 Index decreased 51 points (1.8%) to 2,823 and the Nasdaq Composite declined 89 points (1.0%) to 8,561. In moderately heavy volume, 1.1 billion shares were traded on the NYSE and 3.7 billion shares changed hands on the NASDAQ. The May WTI crude oil futures contract plunged $55.90 to -$37.63 per barrel, while the June futures fell $4.60 to $20.43 per barrel and wholesale gasoline lost $0.04 to $0.67 per gallon. Elsewhere, the Bloomberg gold spot price was $13.22 higher at $1,696.04 per ounce, while the Dollar Index—a comparison of the U.S. dollar to six major world currencies—gained 0.2% to 99.97.

After posting back-to-back weekly gains to put some noticeable separation north of the March 23rd lows, U.S. stocks were solidly lower to begin the week, with the collapse in crude oil prices exacerbating the negative sentiment. The May futures contract for West Texas Intermediate (WTI) crude oil plunged into negative territory, the first time that has ever occurred. The drop was driven by the cash oil market, where prices were also sharply negative. The drastic plunge came amid heightened anxiety that U.S. oil storage tanks are quickly running out of capacity, with the COVID-19 crisis resulting in a sharp decline in consumption. The June contract, which is more actively traded, saw a solid loss, but nowhere near the same extent.

Treasuries are mostly higher with the economic calendar quiet today, and despite the increased optimism regarding the war on the coronavirus that has boosted the stock markets. The yield on the 2-year note was little changed at 0.20%, while the yield on the 10-year note fell 4 basis points (bps) to 0.62%, and the 30-year bond rate decreased 5 bps to 1.23%.

©2020 Charles Schwab & Co., Inc., Member SIPC. All rights reserved.

Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.