Stocks plummet as oil price plunge sends markets into frenzy
Stocks plunged Monday morning as investors braced for a potential price war among oil exporters that could deepen the economic damage caused by the global coronavirus outbreak.
The Dow Jones Industrial Average had fallen more than 1,800 points, an 7.2-percent decline, shortly after 2 p.m. The S&P 500 index was down 7 percent, triggering an automatic 15-minute pause before and the Nasdaq composite was down 6.2 percent.
Stock futures trading predicted stark losses for the market after the Organization of Petroleum Exporting Countries failed to reach a deal on oil output Saturday, prompting Saudi Arabia and Russia to slash prices. The cuts sent oil prices plunging toward the lowest level since 1991.
A sharp drop in oil prices could help boost consumer budgets through lower gasoline prices, but also weigh on the broader economy through the U.S. petroleum industry. The U.S. has also increased its oil exports to exceed its imports within the past decade, making a decline in oil prices a novel threat to the American economy.
Investors fear that a price war among oil exporters could sap global growth amid a likely slowdown driven by the coronavirus and the extensive efforts to contain it. There are more than 100,000 confirmed cases of the potentially lethal respiratory virus globally, including 566 in the U.S.
“Novel coronavirus is an almost perfect demand shock in an already highly fragile growth environment. That fragility should not be underestimated. Markets ignored it. Other signs of fragility are ubiquitous,” wrote Peter Cecchini, chief market strategist at investment firm Cantor Fitzgerald, in a Monday research note.
Italy has also locked down 16 of its northern provinces, restricting the movement of nearly one-quarter of its population for a month, as the nation grapples with one of the largest country-wide outbreaks of the virus outside of China.
U.S. public health officials have urged Americans to remain calm and take measures to protect themselves while bracing for further cases in the country.
“You don’t want to alarm people, but given the spread we’ve seen anything is possible and that’s why we’ve got to be prepared to take whatever action is appropriate to contain and mitigate the outbreak,” said Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, on “Fox News Sunday.“
Fauci added that he doubted the U.S. would need to take “draconian” measures to prevent the spread of the illness, but added that for those “with an underlying condition, particularly an elderly person with an underlying condition, you should start to distance yourself from the risk and above all don’t get on a cruise ship.”
Updated at 2:19 p.m.
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