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Michael Kern

Michael Kern

Michael Kern is a newswriter and editor at Safehaven.com, Oilprice.com, and a writer at Macro-Investing.com. 

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Dow Jones Erases All Gains Under Trump, Drops Below 20,000

The markets can’t seem to catch a break, with the Dow dropping below 20,000 points for the first time since 2017 as the coronavirus crisis continues to fuel a massive stock selloff despite governments across the world scrambling to inject some relief into the global economy. Oil, for its part, is also feeling the sting, with WTI falling to $23.27 and Brent falling to $27.82.

With one of the most volatile trading weeks on record since the 1929 Great Depression, money managers are increasingly calling for a full closure of the stock markets. Yesterday, the Philippines became the first country to shut down its stock market, but others could soon follow. Markets in the United States and the UK have already seen a number of 'circuit breaker' halts in the past couple of weeks. 

The S&P 500 is currently down by over 6 percent, resuming a sell-off that's shaved 29 percent from its record highs. The Dow has taken the biggest hit, however, falling by more than 7 percent since trading began this morning.  

Markets rallied 6 percent Tuesday after the Trump management proposed injecting as much as $1 trillion into the economy through a potential stimulus package while the Federal Reserve dusted off crisis-era programs to keep financial markets afloat, though the rally was short-lived. 

Treasuries remained relatively unfazed after the most significant yield jump since 1982 though municipal bonds continued the most extensive loss since 1987 as markets prepared for a possible wave of spending. 

This is the speediest plunge into bear territory in the history of stock markets. Fear is now officially driving markets.

What’s Next For Oil?

While the impact of the wider market fall is certainly weighing on oil prices, the bigger hit is coming from Saudi Arabia, which is relentlessly pumping more and more crude into markets as the price war between itself and Russia reaches a boiling point.

Oil majors have taken major losses in recent weeks, and it’s likely to get significantly worse before it gets better, with some analysts even suggesting that oil prices could slip into the negatives. 

By Michael Kern for Oilprice.com

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Leave a comment
  • Jessie Phillips on March 18 2020 said:
    At $22 a barrel, why isnt gas at $1 a gallon
  • Mamdouh Salameh on March 18 2020 said:
    While the coronavirus outbreak could go into history as the largest destructive event that has hit the global economy in the last fifty years, Saudi Arabia will be blamed for exacerbating this extremely damaging economic disaster by its rash decision to start an unwinnable price war against Russia that could precipitate a global recession.

    If those advising Saudi Crown Prince Mohammed bin Salman looked back to 2014, they would have realized how disastrous that policy was for the Saudi economy, OPEC members and the global economy even without the presence of the coronavirus outbreak. How could they then advise him to follow the same failed policy when the outbreak is spreading worldwide.

    Furthermore, Saudi Arabia doesn’t have the production capacity to flood the global oil market this time without depleting its stored oil. What happens then if the Houthis of Yemen suddenly decide to attack critical Saudi oil assets crippling its oil production. The only way the Saudis were able to meet their customers’ needs in the aftermath of the attack that destroyed half of their oil production in September 2019 was by drawing on their stored oil.

    All these considerations should have been at the upper most thinking of the Saudi decision makers and their advisers. There is still a bit of time for Saudi Arabia to put pride aside and reverse its decision to help arrest the march of the global economy towards recession.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Henry Hewitt on March 18 2020 said:
    Though it has happened before, closing the stock exchange is probably the worst thing you could do. This thing has to burn itself out and closing the lid and building up psychological and emotional pressure to the breaking point is not sound advice or practice.

    For what it's worth, when the guns of August roared in 1914, the NYSE shut down until November. It can happen and it only takes a handful of people to decide to do it, so don't be surprised. Keep calm; keep your morale in tact; keep your powder dry and wait for the best (if that is the appropriate word) buy point of you lives. We aren't there yet.

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