US Stock Market Overview – Stock Drop Led Down by Energy; Oil Tumbles 25%
US stocks tumbled on Monday with the Dow Industrials falling more than 2K points at one point. At the open of the trading session, the NYSE hit its circuit breaker than halts trading for 15-minutes when prices fall 5%. The 10-year yield continued to decline to hit a rate of 49%, the lowest in history. The World Health Organization is poised to call the outbreak of the coronavirus a pandemic. The WHO generally defines a pandemic as a disease that has become widespread around the world, usually signifies that a virus has reached the point that it can’t be stopped.
Over the weekend, the OPEC+ agreement to cut output fell apart, which led the markets to believe that Saudi Arabia will begin pumping at elevated levels against, reigniting a price war between OPEC, Russia and the United States. Energy shares were shell shocked as Oil dropped 24%, down 30% at the lows of the trading session. All sectors in the S&P 500 index were lower on Monday, driven down by a 25% drop in energy shares. Marathon oil company and Apache were both down nearly 50% on the trading session.
Volatility Continues to Rise
The downdraft in US stocks led to a continued rally in S&P 500 implied volatility. The VIX volatility index surged 30% hitting a high of 64% and settled near 56%. This means that equity options trading believes that the S&P 500 index could fluctuate by as much as 56% from the current level. The demand for protection against an adverse move continues to rise.
The White House continues to underplay the spread of the coronavirus and there are still not enough test kits. The markets see right through this and until an accurate number of cases are reported and then start declining the markets will trade under pressure. As of Monday, the number of US cases were least 607, according to data compiled by Johns Hopkins University. US deaths as a result of the coronavirus were at least 22, according to Johns Hopkins University. This compares to having more than 16-million people that are quarantined in Italy.