The world’s faltering effort to contain the coronavirus outbreak hammered stocks and crude oil on Monday, as new cases surfacing across the globe amplified fears of a downturn.
Worldwide cases of COVID-19 are well over 100,000 — with Italy emerging as the worst-hit country outside of Europe as new infections rise in the U.S. The Italian government’s move to quarantine its entire Northern region raised new fears about the pathogen becoming a global pandemic, sending markets into a free-fall.
A grim offshore trading session turned into a full-fledged rout as equities sold off, and in the bond market, the benchmark U.S. 10-year Treasury yield fell to a fresh all-time low.
Brent crude (BZ=F) prices collapsed, falling by as much as 31% on Sunday evening in what was the largest single-day drop since the U.S. invaded Iraq in 1991.
OPEC’s failure last week to strike a deal to cut production prompted Saudi Arabia to lean in aggressively on cheaper oil prices, which fanned concerns about a full-fledged price war that sent oil into free-fall. Investors appeared to price in the likelihood that Saudi Arabia’s fight with Russia over market share will worsen the dramatic spiral lower in prices, taking place against a backdrop of falling demand and plentiful supply.
The coronavirus epidemic has stoked fears of a sharp global downturn, which have in turn weighed heavily on major benchmarks and crude (CL=F). Around 7:30 a.m. Monday morning, Dow, S&P and Nasdaq futures were all pinned deeply in the red, suggesting that last week’s volatile price action was set to continue.
Most economists estimate that cheaper oil translates into lower gasoline prices, which act as a de-facto tax cut for consumers.
Yet with the COVID-19 epidemic creating supply shocks and forcing business activity to grind to a halt, analysts don’t see much to cheer about in the current price action.
“There's always winners and losers in any market, but right now the idea that lower gasoline prices is going to put more cash in workers' pockets and give consumer spending and the economy a boost doesn't seem to cushion the blow for stock market investors,” wrote Chris Rupkey, MUFG’s chief financial economist, in an email on Sunday evening.
“They want out. Big time. The sky is falling,” he said.
Analysts are also nervously eyeing U.S. shale producers, which are expected to suffer as cheap oil makes it unprofitable to churn out more supply. Most have financed expansion via debt, fueled by cheap credit.
“U.S. shale production is capital intensive, and debt servicing made for high fixed costs,” noted Marc Chandler, managing director at Bannockburn Global Forex. “Even before the latest shocks, shale producers were struggling.”
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9:49 a.m. ET: Stocks resume trading, S&P, Dow plunge anew
The S&P 500 and Dow extended losses after reopening following a 15 minute halt for trading. The broader market index slid about 7.2%, or more than 200 points, while the Dow plummeted by over 2000 points.
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9:41 a.m. ET: Crude oil drops further, sinking 20%
U.S. West Texas Intermediate crude oil prices sank 20% Monday morning shortly after domestic equities opened for trading, hitting $32.73 per barrel. Brent crude oil, the international benchmark, fell 22% to $35.26 per barrel.
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9:34 a.m. ET: Stocks trigger circuit breaker, trading to close for 15 minutes
The S&P 500 sank 7% as of 9:34 a.m. ET, hitting the percent decline required to trigger a 15 minute halt to trading intended to prevent extreme plunges in stock trading. Trading will resume at 9:49 a.m. ET.
This was the first circuit breaker since December 2008 during the financial crisis, according to Bloomberg data.
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9:32 a.m. ET: Stocks slump as markets open
Stocks opened sharply lower Monday morning. The Dow and Nasdaq tumbled more than 7% each, and the S&P 500 was off more than 6.9%.
Here were the main moves in markets, as of 9:32 ET:
S&P 500 (^GSPC): 2,765.78, down -206.59 or -6.95%
Dow (^DJI): 24,035.04, down -1,829.74 or -7.07%
Nasdaq (^IXIC): 7.971.78, down 603.84 or -7.04%
Crude oil (CL=F): $32.51, down $8.77 or -21.25%
10-year Treasury (^TNX): yielding 0.435%
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9:20 a.m. ET: Credit Suisse cuts S&P 500 year-end price target as coronavirus outbreak weighs on corporate profits
Credit Suisse analyst Jonathan Golub on Monday slashed his 2020 price target for the S&P 500 to 3,300 from 3,600, with the new target representing 11% upside from Friday’s closing prices. Growth in earnings per share this year will be “near-zero” this year amid the coronavirus outbreak, he said.
Here’s what Golub had to say in his note:
The cadence of corporate profits should shift as a result of the virus, with the bulk of the downside (-8%) occurring in 2Q, and a rebound in the latter half of the 2020. As such, we are adjusting our 2020 EPS estimate to $165 from $175. Since the market’s peak on Feb.19, multiples have fallen to 16.7x from 19.0x. We believe this decline will largely reverse by year-end, taking the S&P 500 to 3300 vs. our previous target of 3600, representing 11% upside from Friday’s close. That said, we believe the deterioration in news flow is likely to lead to further downside to stock prices over the near-term, before drifting higher.
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7:54 a.m. ET: How low can stocks go before triggering a ‘circuit breaker’?
U.S. stock futures triggered a so-called “circuit breaker,” or trading pause to prevent extreme plunges, during the overnight session Sunday after contracts on the S&P 500 dropped 5%.
During the regular trading session, the threshold of declines to trigger circuit breakers is as follows, according to the New York Stock Exchange:
Trading halts for 15 minutes if the S&P 500 drops 7% against closing prices the prior session (to 2,764.3)
Trading halts for 15 minutes if the S&P 500 drops 13% (to 2,585.96)
Trading halts for the rest of the session if the S&P 500 drops 20% (to 2,377.89)
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7:42 a.m. ET: U.S. 10-year yield sinks to fresh record low as Treasuries along the entire yield curve sinks below 1% for the first time in history
Investors’ flight to safe haven assets sent the whole yield curve for U.S. bonds below 1% for the first time on record. As of 7:42 a.m. ET, the 10-year yield was down more than 30 basis points to 0.403%, and the 30-year yield slid 38.1 basis points to yield 0.835%.
At the lows of the session so far, the U.S. 10-year Treasury yielded as little as 0.318%, an all-time low, according to CNBC data.
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7:34 a.m. ET: Fed increases size of repo operations amid market turmoil
The Federal Reserve Bank of New York is increasing the size of its overnight and term repurchase agreement (repo) operations this week, according to a statement Monday morning.
The overnight offering is set to increase to at least $150 billion, from $100 billion currently, starting Monday through March 12.
The March 10 and March 12 14-day repo operations will be raised to at least $45 billion, or more than double the $20 billion currently.
“These adjustments are intended to ensure that the supply of reserves remains ample and to mitigate the risk of money market pressures that could adversely affect policy implementation,” according to the statement. “They should help support smooth functioning of funding markets as market participants implement business resiliency plans in response to the coronavirus.”
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7:25 a.m. ET Monday: S&P 500, Dow, Nasdaq futures each off at least 4.8% in early trading
Stock futures held onto overnight losses with about two hours to go until the opening bell. Contracts on the Dow were off by 4.87%, or more than 1,250 points, in early trading.
U.S. equity futures tracked losses in global stocks, with each of the DAX, FTSE 100 and CAC indices off more than 6% during regular trading in Europe. Major stock indices in Asia were also lower on the day.
Here were the main moves in markets, as of 7:25 a.m. ET:
S&P 500 futures (ES=F): 2,819.00, down 145 points or -4.89%
Dow futures (YM=F): 24,534.00, down 1,255 points or -4.87%
Nasdaq futures (NQ=F): 8,093.25, down 410 points or -4.82%
Crude oil (CL=F): $31.95 per barrel, down $9.33 or 22.6%
Gold (GC=F): $1,679.70 per ounce, up $7.30 or +0.44%
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8:08 p.m. ET Sunday: U.S. 30-year Treasury bond trades below 1% for the first time ever
30 Year Yield Below 1%: pic.twitter.com/byE2JdiSZn
— Michael McDonough (@M_McDonough) March 9, 2020
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8:01 p.m. ET Sunday: S&P 500 plunge, triggering trading limit
S&P 500 futures (ES=F) fell 5% to 2,819, triggering a trading halt. The Chicago Mercantile Exchange does not allow these contracts to trade by more than 5% up or 5% down during non-U.S. trading hours.
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7:50 p.m. ET Sunday: Markets are getting slammed
Here were the main moves during the pre-market session, as of 7:49 p.m. ET on Sunday night:
S&P 500 futures (ES=F): 2,831.25, down 132.75 points or -4.48%
Dow futures (YM=F): 24,807.00, down 982 points or -3.81%
Nasdaq futures (NQ=F): 8,130.75, down 372.5 points or -4.38%
Crude oil (CL=F): $32.91 per barrel, down $8.37 or 20.28%
Gold (GC=F): $1,698.50 per ounce, up $26.10 or 1.56%
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https://finance.yahoo.com/news/stock-market-news-live-stock-oil-futures-crater-on-coronavirus-crude-war-fears-224253935.html
2020-03-09 13:55:00Z
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