U.S. stocks finish near session lows as oil market crash overshadows plans to ease global lockdowns

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U.S. stocks finished near session lows Monday as investors watched oil futures crash, overshadowing optimism about plans for a staggered easing of global lockdowns in the wake of the COVID-19 pandemic.

Senators also were in a deadlock over potential additional emergency funds for small businesses.

How did benchmarks perform?

The Dow Jones Industrial Average DJIA, -2.44% tumbled 592.05 points, or 2.4%, to settle at 23,650.44. The S&P 500 index SPX, -1.78% lost 51.40 points, or 1.8%, to close at 2,823.16. The Nasdaq Composite Index COMP, -1.03% shed 89.41 points, or 1.2%, to end at 8,560.73, after briefly flipping into positive territory.

The benchmarks are coming off a strong week, where the Dow gained 2.2%, the S&P 500 advanced 3% and the Nasdaq put in a weekly return of 6.1% on Friday.

What drove the market?

Plunging oil prices overshadowed optimism over signs of peak infections in parts of the world, including New York, and plans from Europe, notably Germany, to begin unwinding the recent global economic pause due to the pandemic.

West Texas Intermediate crude for May delivery CLK20, +104.62% finished down $55.90 on Monday, more than 306%, to settle deeply in negative territory at -$37.63 a barrel on the New York Mercantile Exchange, meaning that you have to pay to get someone to take barrels of oil off your hands amid a growing supply glut and storage shortage. The May contract expires at Tuesday’s close. Any traders that are still long crude at that time must take physical delivery, while anyone short must make delivery.

ReadWhy the oil market just crashed below $0 a barrel — 4 things investors need to know

The hope has been that lockdowns of global cities will be gradually removed, spurring optimism that growth could start to make a recovery and bolster markets, even as the potential for a second wave of infections, as a result of easing restrictions, has kept investors on edge.

“It’s a tug of war,” Jack Janasiewicz, portfolio manager at Natixis Investment Managers Solutions in Boston, told MarketWatch. “Historically, when we’ve had crises over the last 20 to 30 years, we’ve always been programmed to lean more optimistic, and also to buy the dip,” he said.

But when it comes to oil prices, Janasiewicz said the market was oversupplied to begin with. “Now we’re seeing slower grow and less oil demand, which still needed to be accounted for.”

Deep DiveThese U.S. oil companies are most at risk in the danger zone

New York Gov. Andrew Cuomo on Monday reiterated his call for the federal government to help source vital reagents and other materials needed to start conducting antibody tests to help determine how many New Yorkers were infected with COVID-19, as part of the Empire State’s efforts to reopen its economy. Such testing served as a major cornerstone of Germany’s gradual restarting of its economy on Monday.

Global infections of COVID-19 have exceeded 2.4 million, with more than 165,000 lives lost to the contagion that was first identified in China in December.

Democratic lawmakers and Treasury Secretary Steven Mnuchin on Sunday said they were close to striking a deal to replenish a roughly $350 billion small-business recovery program, according to reports. But Senate Majority Leader Mitch McConnell threw cold water on hopes of a quick resolution to the funding stalemate, saying that lawmakers would reconvene again Tuesday to discuss the program.

Read:Coronavirus creates a market of ‘haves and have-nots,’ with the Dow posting its best 2-week run in 82 years amid 22 million job losses

Despite some of the ground U.S. stocks have made up since hitting a March 23 low, bets for further weakness recently had been at their highest in more than three years.

Short bets against the popular SPDR S&P 500 Trust SPY, -1.76% rose to more than $68 billion last week, marking the highest level since 2016, according to the Wall Street Journal, citing data from analytics firm S3 Partners.

Monday’s slide in stocks could prelude further downward action this week, with investors showing heightened expectations that the market will fall after the Dow put in its best two-week stretch of gains since 1938, according to Dow Jones Market Data.

SeeAnalyst who called the 2018 rout says S&P 500 is overbought and risks a correction soon

Investors also are bracing for the worst quarter for earnings since the 2008 financial crisis, unsurprisingly due to closures in response to the COVID-19 pandemic. Results this year for the first quarter are on track to decline 14.5% from a year ago, according to John Butters, senior earnings analyst at FactSet, which would mark the biggest decline since the 15.7% plunge in the third quarter of 2009.

“The skeptical folks are saying: How much further do we have to go for prices to reflect the economic data we are likely to see?” said John Cunnison, chief investment officer at Baker Boyer in Washington. “But if we look back at this moment in three years, it probably will look like a fairly attractive place to buy.”

Check out: Mark Mobius says coronavirus stock-market rout will produce ‘incredible bargains,’ but beware a retest of the lows

Which stocks were in focus?

International Business Machines CorpIBM, +0.24% beat earnings, but reported a sales miss Monday, with net income of $1.18 billion, or $1.31 a share, compared with $1.59 billion, or $1.78 a share, in the year-ago period. Analysts surveyed by FactSet had forecast adjusted earnings of $1.81 a share on revenue of $17.59 billion on average. Shares of IBM were up less than 1% in late trade.

Shares of Wynn Resorts LtdWYNN, -6.58% were in focus after Chief Executive Officer Matt Maddox, on Sunday called for the Las Vegas Strip to reopen in mid- to late May, with certain restrictions. Shares of Wynn lost 6.6% on Monday.

Neiman Marcus Group is preparing to file for bankruptcy as soon as this week, Reuters reported Sunday. Neiman was acquired in 2013 by Ares Management LLC ARES, -4.91% and the Canada Pension Plan Investment Board.

Shares of DuPont de Nemours Inc. DD, +3.54% rose 3.6% after it said it would tap its bank credit facilities, delay certain spending and suspend its full-year guidance.

Novartis AG NVS, +0.54%, the Swiss pharmaceutical company, said it would conduct a Phase III clinical trial of hydroxychloroquine in hospitalized patients with COVID-19, after reaching an agreement with the U.S. Food and Drug Administration. The antimalaria drug is one that President Donald Trump has repeatedly touted as a potential treatment for the coronavirus illness. The U.S.-listed shares closed up 0.6%.

Shake Shack IncSHAK, +6.73% will return the $10 million loan the fast-food chain received as part of the CARES Act relief for small businesses, the company said Monday. Shares of the company rose 6.7%.

Southern CoSO, -3.37% said Monday it was raising its dividend by 3.2%, to mark the 19th-straight year the utility has raised its payout. Shares ended 3.4% lower.

How did other markets trade?

Bonds received some safe-haven inflows, with the 10-year Treasury note yield TMUBMUSD10Y, 0.619% down 3 basis points to 0.65%, according to Dow Jones Market Data. Bond prices move in the opposite direction of yields. Gold futures reclaimed their perch above $1,700 an ounce Monday, with June gold GCM20, -0.35% closing up $12.40, or 0.7%, to end at $1,711.20.

The dollar was up 0.2% against its major rivals, based on trading for the ICE U.S. Dollar index DXY, 0.03%.

In Europe, the FTSE 100 Index UKX, +0.44% closed 0.5% higher, the Stoxx Europe 600 SXXP, +0.66% finished 0.7% higher, while the Shanghai Composite Index SHCOMP, -0.50% ended 0.5% higher in Asia overnight trade. China’s CSI 300 Index 000300, -0.52% finished up 0.4% and Japan’s Nikkei 225 Index NIK, -0.79% closed down 1.2%.

Sunny Oh contributed to this report.

Originally Published on MarketWatch

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