Posted on 03/08/2020 3:21:01 PM PDT by Enlightened1
Stock futures tumbled in overnight trading Sunday as investors continued to brace for the economic fallout from the spreading coronavirus, while a shocking all-out oil price war added to the anxiety.
Futures on the Dow Jones Industrial Average plunged more than 900 points. The S&P 500 futures also indicated a 4% drop at the open on Monday. The sharp declines in the futures market pointed to more turbulence ahead after a roller-coaster week that saw the S&P 500 swing up or down more than 2.5% for four days straight.
Saudi Arabia on Saturday slashed official crude selling prices for April, in a sudden U-turn from previous attempts to support the oil market as the coronavirus hammers global demand. The move came after OPEC talks collapsed Friday, prompting some strategists to see oil prices crater to $20 this year.
“Crude has become a bigger problem for markets than the coronavirus,” Adam Crisafulli, founder of Vital Knowledge, said Sunday. “It will be virtually impossible for the [S&P 500] to sustainably bounce if Brent continues to crater,” he added.
International benchmark Brent crude futures plunged 30% to $32.05 per barrel. U.S. West Texas Intermediate crude fell 27% to $30.07 per barrel.
Investors have already been on edge about the coronavirus outbreak that caused major stock averages to tumble into correction territory. As of Sunday, global cases of the infections have climbed to more than 109,000 with at least 3,801 deaths around the world. The situation is also worsening in the U.S. with New York, California and Oregon all declaring a state of emergency.
(Excerpt) Read more at cnbc.com ...
Sort of, but not in the short term. When there is an oil boom, the cost of everything, not just labor goes up because of demand. When oil suffers a significant price decline it takes a long time for the decline in labor and materials demand to push down the cost of those labor and materials.
“Could the DOW tumble be connected to nCV-19 posts here on FR?”
Possibly. We can call it the “Pearl Clutcher’s Rout”
The stock prices of most of the oil production and drilling companies has already fallen to the level that they were when oil was $20/bbl. The OPEC pricing failure hurts Russia and Iran far more than Saudi Arabia but Russia likes to harm others even when it hurts their own interests more. They can't hold out forever or they will go broke.
Low gas prices are positive for consumers and airlines and reduce the cost of electricity and transportation by rail. This will be a help to consumers and home buyers.
There is some concern that oil drillers may not be able to service their debt which could hurt banks but not enough to push the stock market like this.
My sense is that a combination of savvy highly leveraged short sellers and mindless algorithms are the real forces driving the markets lower. They are exploiting investor fear and buying massive amounts of 10 yr bonds to drive down the yield which triggers the algorithm sell programs. Large investors are not going to fight this panic as long as the media can keep up the drum beat.
I'm watching the cumulative corona virus cases model from Johns Hopkins CSSE. When the slope of the logarithmic "Outside China" cases turns negative I suspect the algorithms will reverse and start buying back everything at much lower prices.
What is crazy is one would think THE LOWERING OF GAS PRICES would be good for all businesses and competition.
After all is that not we are always told because more people will buy gas, and it will be cheaper to operate a business.
One of em has to go
I will let the mods decide
Dang and a wine fest had just been called ......
Yeo and that is almost always the duplicate. The one that comes after the original thread.
Sadly, Free Republic is not a “kingmaker” platform.
We have no impact.
>>...one would think THE LOWERING OF GAS PRICES would be good for all businesses and competition.<<
And it is. Everyone using oil and gas is better off.
It’s the sellers and their financiers that will get creamed. If frackers, for example, have been borrowing money and continuing to produce, hoping for higher prices, their loans have just become harder to pay back or refinance because their operations aren’t profitable at the lower prices.
And some institutions own the high-yield debt. They could take a beating too. Plus any banks that have lent a lot to oil drillers.
The oil business is huge. People dependent on the industry to make money could take significant hits. That includes your IRA if it’s loaded with energy stocks.
But generally, you’re right, people are better off with lower energy prices. After all, we’ve seen what happens when oil prices skyrocketed in the 70’s. It cost consumers a lot of money when gas prices tripled overnight.
And when oil prices plummet gas prices stay neutral.
Decreasing the availability of natural gas, would put pressure on oil prices to go back up.
Yup.
One in ten requiring intensive care treatment in Italy.
Natural gas has sunk to 16 cents per 100,000 btu’s. I don’t see much profit margin in that.
>>And when oil prices plummet gas prices stay neutral.<<
As I understand it, fracking has caused an overproduction of gas, to the point where in some places it’s even being flared off rather than sold. So gas is already way down because they kept finding more and more of it while fracking for oil.
If oil production now drops, I suppose it’s even possible that gas prices could rally if the result is a lot less fracking for a while. I’m just guessing though.
Buy Buy Buy!
Better wait until ~Dow 20K....the Fed stock bubble is still deflating.
What the U.S. needs is a lot more faith in the free-market system!
Have you already forgotten the pain run-away oil prices can wreak on your economy? How would you propose supporting the oil industry long-term? Subsidies? Will the hundreds of billions required for that come from the same magical source that will cover the cost of Bernie’s Medicare-for-all plan?
Or, would you rather support OPEC, and keep the price up with supply management? Again — resulting in a cost of hundreds of billions/year to the U.S. economy.
Here, in Canada, where we’ve been oil and gas exporters for decades, we’ve learned (from painful experience) that the only external shocks the oil & gas industry cannot recover from, come from government interventions.
I don’t think there’s any question the plunge in the DJIA is due to the virus. Media legitimately deserves some blame for worsening the problem, but even if all they reported was what government was doing, people would still panic.
I’m not even going to say they’re overreacting anymore. Instead, I will try to say that governments are exercising “an abundance of caution.” It might last until there is a viable vaccine that has been approved and is readily available, which won’t be for goodness knows how many months.
“Not just for oil. Without shale, the natural gas glut will go away and that’s a very big deal.”
Does that mean oil prices down and natural gas prices up?
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