29 of the Dow’s 30 components end lower, and that’s only because Travelers shares finished virtually unchanged
Published: April 21, 2020 at 4:28 p.m. ET, By Chris Matthews and Mark DeCambre
U.S. stocks closed sharply lower Tuesday, driving the major indexes to their lowest levels in about two weeks, as high-flying technology shares gave up ground, and a historic collapse in oil prices eroded the bullish mood on Wall Street.
The downbeat atmosphere more than offset reported progress in Washington on additional aid for businesses badly hurt by the coronavirus pandemic.
How did benchmarks perform?
The Dow Jones Industrial Average US:DJIA fell 631.56 points, or 2.7%, at 23,018, the S&P 500 index US:SPX lost 86.60 points, or 3.1%, to close at 2,736.56, with both benchmarks finishing at their lowest levels since April 7, according to FactSet data. Meanwhile, the Nasdaq Composite Index US:COMP retreated 297.50 points, or 3.5%, to end at 8,263.23, marking its lowest close since April 13.
What’s driving the market?
A historic slump in oil prices weighed on sentiment as investors worried that plunging demand for the commodity would dent a key sector for U.S. employment and investment and signal a deeply depressed global economy.
Tuesday’s action comes a day after West Texas Intermediate crude for May delivery US:CLK20, which expired at the end of the Tuesday’s trade, fell $55.90 a barrel, or 306%, to settle in negative territory for the first time in history.
Even though the energy sector is relatively small compared with the market as a whole, big declines can undermine risk sentiment and spark worries about defaults in the oil-and-gas sector, adding to the likely recessionary environment created by the pandemic.
“The biggest thing to focus on is how quickly and how robustly demand will come back after this,” Raghavendran Sivaraman, Columbia Threadneedle’s head of systematic strategies told MarketWatch.
He views recent U.S. fiscal and monetary stimulus as helping to bridge workers and businesses, but expects stocks to remain volatile until there is more clarity on what consumption patterns emerge once the contagion subsides.
President Donald Trump said in a tweet Tuesday morning that he’s instructed the Treasury secretary to craft a plan to provide financial aid to the oil-and-gas industry, “so these very important companies and jobs will be secured long into the future.”
Technology-sector stocks also were under pressure Tuesday, after Wall Street analysts cut their price targets for Alphabet Inc. and Facebook. and warned about further weakness in online advertising sales.
The drama overshadowed efforts by some U.S. states, including Georgia, South Carolina, Tennessee and Texas, to ease restrictions on businesses and consumers that were put in place to combat the spread of COVID-19.
CNN reported that Congress has reached a deal to provide $450 billion of additional funding to U.S. small businesses hurt by the coronavirus pandemic, with the Senate attempting to pass the measure later today, after lawmakers provided a roughly $350 billion package that was exhausted last week.
Markets also were monitoring North Korea amid speculation about a possible political upheaval brewing in the isolated nation after unconfirmed reports indicate that Kim Jong Un is fragile after recovering from heart surgery. The reports say Kim hasn’t made a public appearance since April 11.
“So succession risk is causing global equity markets to buckle,” wrote Stephen Innes, global chief market strategist at AxiCorp, in a daily research note on Monday.
In economic data, the National Association of Realtors said that existing-home sales fell by 8.5% in March, due to coronavirus.
Which stocks are in focus?
Shares of Google parent Alphabet Inc. US:GOOGL US:GOOG and Facebook Inc. US:FB were hit hard Tuesday, as part of a broad technology-sector selloff, after Wall Street analysts cut their price targets and warned about further weakness in online advertising sales. Shares of Facebook closed down 4.2%, while Google’s Class A shares fell 4%.
International Business Machines Corp. US:IBM reported after Monday’s close that revenue declined in the first quarter amid the spread of COVID-19, and said it was withdrawing its annual forecast. Shares ended down 3%.
Energy stocks were under pressure as oil prices plunged, with Occidental Petroleum Corp. US:OXY down 2% Tuesday. Exxon Mobil Corp. US:XOM and Schlumberger NV US:SLB were also trading lower, off 0.5% and 3.4%, respectively.
Shares of Boeing Co. US:BA fell 5.1%, while those for Intel Corp. US:INTC declined 4.8%, Microsoft Corp. shares fell 4.1% US:MSFT and Cisco Systems Inc.. US:CSCO shares gave up 4.7%, leading the Dow lower.
Shares of Coca-Cola Co. US:KO closed 2.5% lower after the company beat first-quarter revenue and sales forecasts.
Dow component Travelers Companies Inc. US:TRV shares gained ended virtually unchanged after the insurer reported disappointing first-quarter results that it attributed to the COVID-19 epidemic, but raised its dividend from 82 cents per share to 85 cents.
Lockheed Martin Corp. US:LMT beat forecasts for sales and revenue, but lowered its full-year guidance amid uncertainty surrounding the coronavirus. Shares were down 2.6%.
How did other markets trade?
Oil futures remained under pressure Tuesday, with West Texas Intermediate crude for June US:CLM20 losing $8.86, or 43.4%, to settle at $11.57 a barrel on the New York Mercantile Exchange, after touching a low at $6.50. Meanwhile, WTI crude for May delivery US:CLK20, which expired at the end of trading Tuesday, settled at $10.01 a barrel, climbing $47.64, or 126.6%, on Tuesday — the largest one day net gain on record, according to Dow Jones Market Data.
In precious metals, the price of an ounce of gold for June delivery US:GCM20 fell $23.40, or 1.4% to settle at $1,687.80 and ounce.
The yield on the 10-year U.S. Treasury note BX:TMUBMUSD10Y was down about 5.4 basis points to 0.571%.
Global stocks came under pressure, with the Stoxx Europe 600 XX:SXXP finishing down 3.4%. In Asia, stocks closed lower Tuesday, with the China CSI 300 XX:000300 losing 1.2%, Japan’s Nikkei 225 JP:NIK falling 2% and Hong Kong’s Hang Seng Index HK:HSI retreating 2.2%.
Joy Wiltermuth contributed reporting
Source: www.marketwatch.com