Monday April 13th

13-04-2020

Dow futures slide 100 points following historic oil production cut

U.S. stock index futures were lower on Monday morning after OPEC and other oil-producing countries reached a deal on a massive production cut, while investors continued to digest the impact of the coronavirus. Dow Jones Industrial Average futures pointed to an opening loss of around 117 points. S&P 500 and Nasdaq 100 futures also indicated opening declines for the two indexes. The group of countries known as OPEC+ agreed to cut production by 9.7 million barrels per day, making it the single-largest output reduction on record. President Donald Trump tweeted the accord will “will save hundreds of thousands of energy jobs in the United States,” adding it will be “great for all.” Oil prices had fallen more than 40% since early March after Saudi Arabia-led OPEC and Russia failed to reach a deal as the coronavirus pandemic dampened global economic prospects. Oil prices moved higher early Monday morning stateside after OPEC and its allies agreed to cut production by 9.7 million barrels per day. The deal, which was finalized on Sunday after marathon discussions that spanned four days, is the single largest output cut in history. U.S. West Texas Intermediate crude rose 1.3% to trade at $23.06 per barrel, while international benchmark Brent crude traded 10 cents higher at $31.5. Earlier in the session WTI rose as much as 8%, but also traded in negative territory at one point in a volatile session. Sunday’s moves come after the U.S. stock market enjoyed one of its best weeks ever. The Dow posted its seventh-best weekly performance, rallying 12.7%. The S&P 500 had its biggest one-week gain since 1974, jumping 12.1%. Wall Street’s strong weekly gains came in large part because of an apparent improvement in the U.S. coronavirus outlook along with massive stimulus from the Federal Reserve. Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said on Sunday he was cautiously optimistic that the outbreak was slowing down in the U.S. He also said parts of the country may start to reopen next month. However, Fauci added this does not mean the entire country would flip a “light switch” and go back to normal. Confirmed cases in the U.S. now total nearly 550,000, more than any other country in the world, according to Johns Hopkins University. New York state accounts for more than 189,000 of those cases. The death count in the U.S. from the virus is more than 21,000. “The various mitigation efforts to contain the spread of COVID-19 seem to be working. What comes next is very much up in the air,” said Marc Chaikin, CEO of Chaikin Analytics. “With the timing of the reopening of the economy now being debated and the economic effects of the engineered shutdown still to be determined, we urge investors to remain wary but watchful as events unfold.” Chaikin noted the market’s recent rally — which led the S&P 500 to retrace half of its downside move from record highs — may set up investors for disappointment as the corporate earnings season begins. Johnson & Johnson, JPMorgan Chase, and Bank of America are among the companies scheduled to report earnings this week. Several companies have removed their earnings guidance, citing the coronavirus outbreak, while others have slashed their profit forecasts. There are no economic data releases due Monday. Despite the market’s rally last week, the major averages are still more than 17% below the records set in February.  Both the Dow and S&P 500 are down 16.9% and 13.7%, respectively, for the year while the Nasdaq has fallen over 9% in 2020. Stocks in Asia declined on Monday as the Organization of the Petroleum Exporting Countries and its allies reached an agreement on a record oil production cut. In Japan, the Nikkei 225 slipped 2.33% to close at 19,043.40 while the Topix index fell 1.69% to end its trading day at 1,405.91. South Korea’s Kospi also declined 1.88% to close at 1,825.76. Mainland Chinese stocks declined on the day, with the Shanghai composite shedding 0.49% to about 2,783.05 while the Shenzhen composite fell 0.799% to around 1,707.46. Markets in Hong Kong and Australia were closed on Monday for Easter Monday. Gold prices held steady near a one-month high on Monday, supported by growing concerns over the extent of the economic hit from the coronavirus pandemic. Spot gold was up 0.1% at $1,690.08 per ounce, having risen to its highest since March 9 on Friday. Most European markets are closed for the Easter Monday holiday. U.S. gold futures fell 0.6% to $1,741.40.