A slide in energy stocks has weighed on Wall Street as crude prices crashed at the start of a week packed with quarterly earnings reports and economic data likely to underline the damage from the coronavirus outbreak.
The S&P 500 energy index has shed 2.8 per cent and is on track for its sixth slide in seven sessions as the US West Texas Intermediate (WTI) contract fell 35 per cent to its lowest since 1998 on concerns of oversupply.
Exxon Mobil and Chevron tumbled more than three per cent and were among the biggest decliners on the blue-chip Dow Jones index.
All the major S&P 500 sub-indexes were trading lower on Monday, but declines on the Nasdaq were limited by Amazon and Netflix – deemed “stay-at-home” stocks as widespread lockdowns fuelled demand for online streaming and home delivery of groceries.
Wall Street’s main indexes have rallied this month, with the S&P 500 ending Friday with its biggest two-week percentage gain since 1974 on a raft of global stimulus and hopes the virus was nearing a peak in the US.
Still, the benchmark index is about 15 per cent below its all-time high and analysts have warned of a deep economic slump from the halt in business activity and millions of layoffs.
“Today is largely a give-back of some of the previous gains as people are trying to assess whether it’s going to be six months or nine months or 12 months until the economy is back on regular footing,” said Dev Kantesaria, founder portfolio manager of hedge fund Valley Forge Capital Management in Wayne, Pennsylvania.
After US banks kicked off the quarterly earnings season with painful forecasts for 2020, investors will keep a close watch on reports from Delta Air Lines, Southwest Airlines and Netflix later in the week.
Overall, analysts expect earnings for S&P 500 firms to fall 13 per cent in the first quarter, according to IBES data from Refinitiv, while Goldman Sachs has predicted share buybacks will halve and dividends will slide 23 per cent in 2020.
At 10.18am local time on Monday the Dow Jones Industrial Average was down 361.83 points, or 1.49 per cent, at 23,880.66, the S&P 500 was down 31.91 points, or 1.11 per cent, at 2842.65 and the Nasdaq Composite was down 45.34 points, or 0.52 per cent, at 8604.81.
Hopes have also risen for a gradual reopening of the economy after US President Donald Trump cited signs of plateauing in the virus outbreak last week and outlined new guidelines for states to pull out of shutdowns.
But his plan was thin on details and left the decision largely up to state governors.
New York City Mayor Bill de Blasio said on Monday it could take weeks if not months before the country’s most populous city reopens due to a lack of widespread testing.
Andrea Cicione, head of strategy at TS Lombard in London, said a recovery is likely some some way off.
“The recovery will be much slower than the market is currently pricing in simply because social distancing measures can be relaxed but not removed until we have a vaccine or a very effective cure,” she said.
In economic news, surveys on April US manufacturing and services sectors are due on Thursday, while US jobless claims are forecast to have hit as many as five million in the week ended April 18, on top of 22 million claims in the previous four weeks.