Stocks Drop Most in 3 Weeks; Oil Collapse Deepens: Markets Wrap

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22 Apr 2020, 07:04 AM IST

Stocks Drop Most in 3 Weeks; Oil Collapse Deepens: Markets Wrap

Traders work on the floor of the New York Stock Exchange in New York, U.S. (Photographer: Michael Nagle/Bloomberg)

(Bloomberg) -- U.S. stocks tumbled the most in almost three weeks and Treasury bonds rallied as turmoil in the crude oil futures market triggered a fresh bout of risk aversion.

The S&P 500 fell 3.07%, with equity investors shrugging off a deal reached by the White House and congressional leaders on fresh spending to combat the impact of the coronavirus pandemic. The historic rout in crude rattled markets for a second day, with the June contract plunging almost 70% at one point after May contracts that expired Tuesday sank below zero for the first time in history. The benchmark 10-year Treasury yield dropped below 0.55%.

The gut-wrenching oil debacle may signal the hit to the global economy will be far worse than anticipated by investors who sent the S&P 500 up 28% from its March lows. While major economies around the world take tentative steps toward reopening, signs the U.S. is close to bolstering spending did little to offset fresh concerns over the depth of the recession.

“Markets appear to be taking a breather after that rapid recovery,” said Candice Bangsund, portfolio manager of global asset allocation at Fiera Capital Corp. “A lot of this is being driven by the profound and historic collapse in crude prices. That’s largely been the catalyst that’s roiled already fragile market sentiment.”

President Donald Trump said his administration is working on a plan to make money available to the oil industry to prevent the loss of jobs after prices plunged.

Corporate earnings add to woes. Deep profit declines often come with no company insight into the remainder of the year and mounting signs that capital investment is set to plunge. Still, Netflix shares rose after the close of regular trading when the company said it added nearly twice as many subscribers as predicted in the first quarter. Chipotle withdrew its earnings guidance.

Terminal customers can read our TOPLive earnings blog.

Meanwhile, reports that North Korea’s Kim Jong Un was in critical condition added to the uncertainty. Shares in the region slumped. The dollar climbed against most major currencies, with the won and ruble tumbling and the yen edging up.

Elsewhere, the kiwi slumped after Reserve Bank of New Zealand Governor Adrian Orr said he was open-minded on the idea of directly monetizing sovereign debt.

These are the main moves in markets:

Stocks

The S&P 500 Index dipped 3.1% to 2,736.49 as of 4:01 p.m. New York time, the lowest in almost two weeks on the largest decrease in almost three weeks.

The Dow Jones Industrial Average dipped 2.7% to 23,019.71, the lowest in almost two weeks on the biggest decrease in almost three weeks.

The Nasdaq Composite Index dipped 3.5% to 8,263.23, the lowest in a week on the largest decrease in almost three weeks.

The MSCI All-Country World Index dipped 3% to 460.91, the lowest in almost two weeks on the biggest decrease in almost three weeks.

Currencies

The Bloomberg Dollar Spot Index climbed 0.4% to 1,258.96, the highest in two weeks.

The Japanese yen weakened 0.1% to 107.76 per dollar.

The euro was little changed at $1.0861.

The British pound decreased 1.1% to $1.2306, the weakest in two weeks on the biggest tumble in more than a month.

Bonds

The yield on two-year Treasuries declined less than one basis point to 0.20%.

The yield on 10-year Treasuries decreased four basis points to 0.57%, the lowest in six weeks.

Britain’s 10-year yield fell four basis points to 0.297%, the lowest in more than five weeks on the largest drop in more than a week.

Germany’s 10-year yield fell three basis points to -0.48%, the lowest in three weeks.

Commodities

West Texas Intermediate crude for June decreased 35% to $13.20 a barrel, its sixth straight decline.

Brent crude fell 23% to $19.90 a barrel, the lowest on record with the biggest fall on record.

Gold weakened 0.6% to $1,685.69 an ounce.