Disarray in Oil Rattles Markets….

The U.S. equity markets added to yesterday’s sharp losses amid continued dysfunction in the crude oil markets, while market participants attempt to assess the timing of when the U.S. economy may be able to reopen. The May contract for crude, which expired today, was able to recover somewhat from its plunge into negative territory, the first time in history, while the June contract lost solid ground. Hopes of a Congressional deal for another round of funding for small businesses remained elusive. Q1 earnings season continued in earnest, with Dow members IBM, Coca-Cola and Travelers all reporting the impact of COVID-19, while J.M. Smucker upped its 2020 guidance. Treasury yields were lower, as bond prices gained ground, and amid a tumble in existing home sales for March, while gold declined and the U.S. dollar added to a recent rise. Europe and Asia also finished broadly lower.

The Dow Jones Industrial Average fell 632 points (2.7%) to 23,019, the S&P 500 Index decreased 87 points (3.1%) to 2,737 and the Nasdaq Composite tumbled 298 points (3.5%) to 8,263. In moderately heavy volume, 1.0 billion shares were traded on the NYSE and 3.7 billion shares changed hands on the NASDAQ. The May WTI crude oil futures contract rose $47.64 to $10.01 per barrel, while the June futures fell $8.86 to $11.57 per barrel and wholesale gasoline lost $0.16 to $0.51 per gallon. Elsewhere, the Bloomberg gold spot price was $10.06 lower at $1,685.59 per ounce, while the Dollar Index—a comparison of the U.S. dollar to six major world currencies—gained 0.2% to 100.19.

As the markets grapple with the recent rally well off of the March 23rd lows and the festering uncertainty regarding the reopening of the U.S. economy, volatility in the crude oil markets has added another layer of skittishness. Yesterday, the May futures contract for West Texas Intermediate (WTI) crude oil plunged into negative territory for the first time ever. 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.

Existing home sales fell 8.5% month-over-month (m/m) in March to an annual rate of 5.27 million units, compared to the Bloomberg expectation of 5.25 million units and February’s downwardly-revised 5.76 million rate. Sales dropped by the most in March since November 2015, as sales of single-family homes and purchases of condominiums and co-ops both were down m/m. Single-family sales were up y/y, while multi-family structure sales were down versus the prior year. The median existing home price was up 8.0% from a year ago to $280,600, marking the 97th straight month of y/y gains. Unsold inventory came in at a 3.4-months pace at the current sales rate, down 10.5% from a year earlier. Sales were lower m/m in all four regions but sales in the Midwest and South were higher y/y. Existing home sales reflect contract closings instead of signings and account for a large majority of the home sales market.

Treasuries were mostly higher on the increased optimism regarding the war on the coronavirus, along with recent dismal economic data and the massive amount of fiscal and monetary policy support. The yield on the 2-year note was flat at 0.20%, while the yield on the 10-year note moved 6 basis points (bps) lower to 0.57% and the 30-year bond rate dropped 7 bps to 1.16%.

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