It was a bit of poetic justice today to see the price of crude tumble into negative digits for the first time in history.  The oil producers have been so greedy, deliberately increasing production into an already glutted market in order to trigger a price war to hopefully corner the market, a price war that has been a major contributor to the recent economic chaos.  But they did not foresee COVID-19.  So now they are literally paying the price, literally have to pay their buyers to take the excess crude off their hands.  Maybe now they’ll get the message that they need to turn off the taps.  It sent the Dow down nearly 600 points.  But the S&P has still now recovered nearly 2/3 of its losses from the March low and remains just 17% below the February record high.  Volume seems to be steadying out at around 12 billion which points to a little bit more stability.  But it’s still way above normal where it will likely remain until until there is a vaccine and/or treatment.  Let’s see how long the oil producers are forced to give their product away.  

Mon  APRIL 20, 2020 / 6:40 pm 

Wall Street drops as oil traders cannot give away U.S. crude

Noel Randewich

DJ:  24,242.49  +704.81      NAS:  8,650.14  +117.78        S&P:  2,874.56  +75.01     4/17

DJ:  23,650.44  -592.05       NAS:  8,560.73  -89.41           S&P:  2,823.16  -51.40      4/20

(Reuters) - Wall Street tumbled on Monday after U.S. crude futures turned negative for the first time ever, with traders forced to pay to unload crude as the May contract expired during a global economic slump unleashed by the coronavirus outbreak.  The S&P energy index .SPNY tumbled 3.7% after the front-month May U.S. West Texas Intermediate (WTI) contract CLc1 actually turned negative, with sellers offering $37.63 a barrel to any traders willing to take it.

With billions of people staying home around the world due to the coronavirus, physical demand for crude has dried up.  “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.  He said lower oil prices could boost the economy if it encouraged people to buy more fuel, “but that requires people getting out.”  Year to date, the energy index has lost 45%, by far the worst performer among 11 sectors.

Weathering the broad market sell-off, Amazon (AMZN.O) rose 0.8% and Netflix (NFLX.O) jumped 3.4%. 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 almost 17% 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 on Thursday, is expected to slide to recession-era levels.

The Dow Jones Industrial Average .DJI dropped 2.44% to end at 23,650.44 points, while the S&P 500 .SPX lost 1.79% to 2,823.16.  The Nasdaq Composite .IXIC dropped 1.03% to 8,560.73. 

In extended trade, International Business Machines Corp (IBM.N) rose 0.5% after it posted quarterly revenue slightly lower than Wall Street expected, but beat profit targets. 

During Monday’s session, volume on U.S. exchanges was 12.3 billion shares, compared to a 13.4 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 2.99-to-1 ratio; on Nasdaq, a 1.62-to-1 ratio favored decliners.  The S&P 500 posted 10 new 52-week highs and no new lows; the Nasdaq Composite recorded 39 new highs and 20 new lows.