Wall Street fell sharply on Monday after U.S. crude futures turned negative for the first time in history, underscoring the chaos the coronavirus pandemic has unleashed on the global economy.
The S&P energy index tumbled 4% after the front-month May U.S. West Texas Intermediate (WTI) contract turned negative – unprecedented in history – with sellers offering buyers $37.63 a barrel.
With much of the global economy suspended due to the coronavirus, physical demand for crude has dried up, creating a global supply glut as billions of people stay home.
“What the energy market is telling you is that demand isn’t coming back anytime soon, and there’s a supply glut,” said Kevin Flanagan, head of fixed income strategy at WisdomTree Asset Management in New York. “This price decline can be good if it means more people going to the pump, but that requires people getting out.”
Weathering the broad market sell-off, Amazon rose 1.6% and Netflix jumped 4%. Both of those companies have benefited from additional demand as millions of people stay home due to the coronavirus. Netflix reports its quarterly results on Tuesday after the bell.
Helped by a $2 trillion U.S. government package to stimulate the economy, and by bets that the virus was nearing a peak in the United States, the S&P 500 has climbed over 25% from its March low.
The benchmark index remains 15% below its February record high, and analysts have warned of a deep economic slump from the halt in business activity and millions of layoffs.
U.S. jobless claims touched 22 million in the four weeks to April 11, and analysts have forecast as many as 5 million more in the latest week. A reading of an April U.S. manufacturing survey, also due Thursday, is expected to slide to recession-era levels.
At 2:57 p.m. ET, the Dow Jones Industrial Average was down 2.22% at 23,704.26 points, while the S&P 500 lost 1.61% to 2,828.14.
The Nasdaq Composite dropped 0.75% to 8,585.27.
International Business Machines Corp rose 0.7% ahead of its quarterly report, expected after markets close.
Declining issues outnumbered advancing ones on the NYSE by a 3.01-to-1 ratio; on Nasdaq, a 1.63-to-1 ratio favored decliners.
The S&P 500 posted 10 new 52-week highs and no new lows; the Nasdaq Composite recorded 38 new highs and 12 new lows.