Stocks tumble on oil, virus worries
Dow plunges 2,000 points amid Saudi, Russia oil production battle, growing fears of epidemic
On Monday morning, coronavirus panic spread from Wall Street to Main Street.
The Dow Jones Industrial Average quickly fell 1,884.88 points after trading began at 9:30 a.m. Monday — down 7.29% — to around 23,979.90 points as stock experts focused on falling oil prices and growing fears that a mounting health crisis could put many communities in the United States and elsewhere on lockdown and trigger a recession.
In a highly unusual move, trading was halted on Wall Street for 15 minutes early Monday morning in light of the swift selloff.
The Dow — which reached record highs in mid-February — suffered its worst point drop in one day and fell 2,013.76 points or down 7.79% to close at 23,851.02 points Monday. The Dow was down for the 11th time in 13 days of trading.
If there is a silver lining in the market swoon, it is that gas prices are headed lower. They are down roughly 30 cents from where they were a year ago, according to GasBuddy.com. The price drop is highly unusual and during a time when gas prices trend upward as we move toward spring and summer.
Economists and others know too well that a stunning reversal in gas prices is a reflection of more bad news ahead — and that’s what drove stock prices down on Wall Street.
“You’re losing thousands on your 401(k) today and you’re going to save a few cents at the pump,” said Patrick DeHaan, head of petroleum analysis at GasBuddy.com.
West Texas Intermediate crude fell 24.59% to $31.13 a barrel on Monday. The oil shock was described as worst day for oil prices since the Gulf War in 1991.
“Oil prices are tanking,” DeHaan said.
Oil prices suffered a stunning collapse in electronic trading Sunday as Saudi Arabia and Russia locked in battle over production.
Saudi Arabia wanted to cut production in light of declining global demand, which could shore up prices. But non-OPEC Russia refused to agree to OPEC’s proposal to rescue the coronavirus-battered oil market.
“The result was Russia not willing to play ball,” said Kurt Rankin, economist for PNC Financial Services Group.
Then, Rankin said, Saudi Arabia unexpectedly shifted its course and opted to ramp up oil production, not cut it as initially proposed.
Up until now, Wall Street had expected oil prices to start edging upward in the weeks ahead based on OPEC’s initial proposal.
Yet, plummeting oil prices only fueled all the upheaval that has been taking place on Wall Street for the last two weeks because of coronavirus panic.
So, Rankin said, the shift in oil prices had a significant psychological impact on Wall Street traders.
DeHaan said he expects prices at the pump to potentially drop another 20 cents or 25 cents in the next week or so, given where oil prices are now.
He quoted current prices Monday morning of $1.88 a gallon at Costco in southeast Michigan.
But DeHaan said he has no doubt that today’s gas prices at the pump will come tumbling down again.
He said the news isn’t good for oil. When people are cutting back travel and staying home more to avoid a health risk, they’re likely to drive far less. Some may work remotely at home if the risk of coronavirus increases in the days ahead.
“Certainly, this is something that is very rare,” DeHaan said. “Motorists will be the beneficiaries.”