U.S. stocks plunged Tuesday, putting major benchmarks on pace for second day of losses, as investors parsed a historic fall in oil prices, a fresh round of corporate earnings reports and progress in Washington on additional congressional aid for businesses hit by the coronavirus pandemic.
How are benchmarks performing?
The Dow Jones Industrial Average DJIA, -2.48% fell 658 points, or 2.8%, at 22,990, the S&P 500 index SPX, -2.87% lost 88 points, or 3.1%, to trade at 2,733, while the Nasdaq Composite Index retreated 318 points, or 3.7%, at 8,242.
On Monday, the Dow fell 547 points, or 2.2%, to 23,700. The S&P 500 index declined 49 points, or 1.7%, to around 2,825. The Nasdaq Composite Index COMP, -3.36% lost 76 points, or 0.9%, to 8,573.
What’s driving the market?
A 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 CLK20, +114.32%, which expires at the end of the day’s trade, 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 with 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 in place to combat the spread of COVID-19.
Investors also were tuned into 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 wrote on Twitter that 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.
Markets also were monitoring 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. IBM, -6.06% 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 6.3%.
Energy stocks were under pressure as oil prices plunged, with Occidental Petroleum Corp. OXY, -3.80% down 4.5% Tuesday Exxon Mobil Corp. XOM, -0.14% and Schlumberger NV SLB, -3.12% were also trading lower.
Shares of Coca-Cola Co. KO, -1.84% were 1.7% lower after the company beat first-quarter revenue and sales forecasts.
Dow component Travelers Companies Inc. TRV, +1.74% shares gained 2.2% 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.
Lockheed Martin Corp. LMT, -2.49% beat forecasts for sales and revenue, but lowered its full-year guidance amid uncertainty surrounding the coronavirus. Shares were down 1.6%.
How are other markets trading?
Oil futures remained under pressure Tuesday, with West Texas Intermediate crude for June CLM20, -35.43% down 35.7%, or $7.29 to $13.20 per barrel.
In precious metals, the price of an ounce of gold for June delivery GCM20, -1.05% fell $13.40, or 0.81% to $1,698.
The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, 0.562% was down about 8 basis points to 0.55%.
Globally stocks were under pressure, with the Stoxx Europe 600 SXXP, -3.39% down 3.4%. In Asia, stocks closed lower Tuesday, with the China CSI 300 000300, -1.17% losing 1.2%, Japan’s Nikkei 225 NIK, -1.97% falling 2% and Hong Kong’s Hang Seng Index HSI, -2.20% retreating 2.2%.
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