US close: Wall Street crumbles as coronavirus, oil prices take toll
Stocks on Wall Street plunged by unprecedented amounts on Monday, as coronavirus fears rolled on, which combined with an unexpected price slash from oil producer Saudi Arabia to make for a particularly dark day on Wall Street.
The Dow Jones Industrial Average lost 7.79% to 23,851.02, the S&P 500 lost 7.6% to 2,746.56, and the Nasdaq Composite was 7.29% lower at 7,950.68.
“Stock markets in freefall and it seems unlikely central banks and governments in the short-term can do anything,” said Oanda’s Edward Moya.
“Technical selling is getting ugly and even though expectations are high the Fed will take rates to the zero bound, the retail investor will likely want to wait this one out.”
Moya said it seemed the collapse with oil prices had added a log to the deflationary fire the Fed wanted to try and extinguish.
“Virus fears, deflationary risks, and growing stress in the credit markets, means markets will see the Fed launch a new QE program very soon.”
At the open, a 7% drop on the S&P 500 triggered the so-called ‘circuit breaker’ mechanism, designed to help delay a complete market crash, which led to a short halt to trading.
A drop below 2,710 points would have seen the benchmark gauge enter so-called 'bear market" territory.
Volatility levels in stocks came unhinged as the unexpected downward spiral in crude swept across asset classes, triggering margin calls in many instruments and sending traders rushing to try and adjust their positions.
The VIX volatility index, Wall Street's so-called 'fear gauge', was last up 29.85% at 54.46.
At the same time, Brent crude was last down 26.18% at $33.42 per barrel, and West Texas Intermediate was 24.19% weaker at $31.47.
WTI had hit $30 a barrel in overnight trading before the markets opened, with analysts at a number of top investment banks, including those at Bank of America, Goldman Sachs and Citi, openly talking of a drop below $30, even if short lived.
At the weekend, Saudi Arabia slashed its official selling prices by a record amount after Russia announced that it would not contribute more to any oil output curbs agreed by OPEC members.
And according to sources cited by Bloomberg, Saudi had said that it might ramp-up oil production as high as 12 million barrels a day, in a bid to maintain if not increase its market share.
Against that backdrop, traders' attention was fixated on Bloomberg's gauge of financial stress, which over the past 16 days had increased by more than in the 82-day move seen during the last market shake-up in December 2017.
With falling energy quotes it was expected that it might become much harder for increasingly hard-pressed shale oil companies in particular to tap corporate debt markets.
In response to the sudden further tightening in credit conditions, the US central bank, the Federal Reserve, moved rapidly to add liquidity, increasing its daily repurchase operations to $150.0bn from $100.0bn.
Yields on the benchmark 10-year US Treasury settled at 0.501%, which was up from 0.339% earlier in the day, but was still a significant drop from its then-record low close of 0.709% on Friday.
No major economic reports were scheduled for release on Monday.
Energy plays were among the biggest percentage fallers on Wall Street, with Diamondback Energy down 44.65%, Apache Corporation 53.86% lower, Marathon Oil 46.85% weaker, Noble Energy down 29.88%, and Halliburton losing 37.64%.
Going the other way, some of Monday's top gainers included companies that might benefit from spendthrift consumers, with Dollar Tree rising 4.08% and Dollar General adding 0.45%, although big-box retail behemoth Walmart reversed earlier gains to end 0.06% below the waterline.
Cabot Oil & Gas managed to rise 3.18% by the end of trading, coming off earlier highs but still in positive territory, on the back of speculation that the oil price drop would cut supplies of natural gas from shale producers, to its benefit.
Dow Jones - Risers
Dowdupont Inc. (DWDP) $30.52 0.00%
Walmart Inc. (WMT) $117.16 -0.06%
Verizon Communications Inc. (VZ) $55.83 -1.83%
Pfizer Inc. (PFE) $33.76 -3.60%
Unitedhealth Group Inc. (UNH) $273.44 -3.67%
Johnson & Johnson (JNJ) $136.44 -3.94%
Merck & Co. Inc. (MRK) $78.96 -3.94%
Walgreens Boots Alliance, Inc. (WBA) $48.44 -4.10%
Cisco Systems Inc. (CSCO) $37.96 -4.33%
Procter & Gamble Co. (PG) $116.06 -4.60%
Dow Jones - Fallers
Chevron Corp. (CVX) $80.67 -15.37%
Caterpillar Inc. (CAT) $104.07 -14.28%
JP Morgan Chase & Co. (JPM) $93.44 -13.55%
Boeing Co. (BA) $227.17 -13.40%
Exxon Mobil Corp. (XOM) $41.86 -12.22%
Goldman Sachs Group Inc. (GS) $172.81 -10.39%
Walt Disney Co. (DIS) $104.35 -9.47%
American Express Co. (AXP) $98.29 -9.19%
Intel Corp. (INTC) $50.85 -8.82%
United Technologies Corp. (UTX) $115.36 -8.79%
S&P 500 - Risers
AutoZone Inc. (AZO) $1,113.69 5.03%
Dollar Tree Inc (DLTR) $83.51 4.08%
Cabot Oil & Gas Corp. (COG) $16.89 3.18%
Advance Auto Parts (AAP) $130.37 1.92%
H&R Block Inc. (HRB) $20.12 1.67%
O'Reilly Automotive Inc. (ORLY) $373.63 1.51%
Clorox Co. (CLX) $174.90 0.95%
Consolidated Edison Inc. (ED) $88.66 0.86%
Dollar General Corp (DG) $159.28 0.57%
Anadarko Petroleum Corp. (APC) $72.77 0.00%
S&P 500 - Fallers
Apache Corp. (APA) $9.55 -53.86%
Occidental Petroleum Corp. (OXY) $12.51 -53.43%
Marathon Oil Corp. (MRO) $3.63 -46.85%
Diamondback Energy Inc. (FANG) $26.88 -44.65%
Cimarex Energy Co (XEC) $15.07 -38.21%
ONEOK Inc. (OKE) $38.10 -37.76%
Halliburton Co. (HAL) $8.15 -37.64%
Devon Energy Corp. (DVN) $8.37 -37.40%
Pioneer Natural Resources Co. (PXD) $66.31 -36.92%
Hess Corp. (HES) $32.98 -33.67%
Nasdaq 100 - Risers
Dollar Tree Inc (DLTR) $83.51 4.08%
O'Reilly Automotive Inc. (ORLY) $373.63 1.51%
Celgene Corp. (CELG) $108.24 0.00%
Shire Plc Ads (SHPG) $179.20 0.00%
Citrix Systems Inc. (CTXS) $115.95 -1.66%
eBay Inc. (EBAY) $35.52 -2.39%
Idexx Laboratories Inc. (IDXX) $242.83 -2.83%
Costco Wholesale Corp. (COST) $301.98 -3.01%
Mondelez International Inc. (MDLZ) $53.94 -3.09%
Take-Two Interactive Software Inc. (TTWO) $113.88 -3.24%
Nasdaq 100 - Fallers
Dish Network Corp. (DISH) $24.93 -14.65%
Tesla Inc (TSLA) $608.00 -13.57%
Western Digital Corp. (WDC) $47.40 -13.39%
Wynn Resorts Ltd. (WYNN) $81.93 -12.87%
Mercadolibre Inc. (MELI) $539.64 -12.18%
CSX Corp. (CSX) $60.39 -11.52%
Micron Technology Inc. (MU) $45.97 -10.69%
Vodafone Group Plc ADS (VOD) $15.91 -10.42%
Microchip Technology Inc. (MCHP) $77.96 -10.35%
Biomarin Pharmaceutical Inc. (BMRN) $84.79 -10.06%