Stocks Sink as US Oil Prices Plunge into Negative Territory

The major U.S. stock indexes declined on Monday after U.S. crude oil futures turned negative for the first time in history, highlighting the disorder the coronavirus pandemic has unleashed on the global economy. The markets were also negatively impacted by a delay in funding for the depleted small business rescue loan program.

In the cash market, the benchmark S&P 500 Index settled at 2823.16, down 51.40 or -1.96%. The blue chip Dow Jones Industrial Average finished at 23650.44, down 592.05 or -2.65% and the technology-based NASDAQ-Composite closed at 8560.73, down 89.41 or -1.15%.

Nearby Crude Oil Futures Settle at Negative

The nearby May West Texas Intermediate (WTI) crude oil futures contract, which expires on Tuesday, plunged more than 100% to settle at negative $37.63 per barrel, a bizarre move tied to weak demand outlook and storage capacity issues.

Negative prices is a strange phenomenon that analysts chalked up to the collapse in demand for oil contracts expiring this week. Negative prices indicate that producers will pay the buyer to take the contracted oil off their hands. They are doing this because refineries don’t need the oil and are near storage capacity with most of the country shut down.

Although the crude oil news pressured equity prices, the sell-off in the stock market could have been worse if not for higher deferred crude oil prices.

Senate Has No Deal on Next Coronavirus Relief Bill

The Senate did not reach a deal on the next coronavirus relief bill in time for a brief Monday session, but set up a vote as soon as Tuesday afternoon to replenish a key small business aid program.

Negotiators signaled they are close to a deal that could include $370 billion in loan programs for small businesses, designed to keep employees on the payroll as businesses across the country shutter. It may also include $75 billion for hospitals and $25 billion for testing – but not money for state and local governments that Democrats sought, as of now.

United Airlines Sees $2.1 Billion Loss

United Airlines said on Monday it expects to report a pre-tax loss of about $2.1 billion for the first quarter, after the coronavirus outbreak smothered its growth aspirations in Latin America and led the company to seek another $4.5 billion in government aid.

All U.S. airlines are seeking government money to help them weather what they say is the worst crisis in the industry’s history. With few people flying, United said it plans to operate only about 10% of its normal schedule in May and June.

IBM Sees Shift in Client Spend Priorities, Withdraws Annual Forecast

International Business Machines Corp’s (IBM) clients have shifted priorities toward saving capital in recent weeks because of COVID-19, hitting software sales in particular, new Chief Executive Officer Arvind Krishna said as the company withdrew its 2020 annual forecast.

The company posted quarterly revenue slightly lower than Wall Street expected, but beat profit targets as sales in its high-margin cloud computing business rose 19%.

IBM has ample free cash flow and liquidity to invest in its business and continue paying dividends, Chief Financial Officer James Kavanaugh told Reuters.

‘Stay-at-Home’ Stocks Continue to Rise

Weathering the broad market sell-off, Amazon rose 1.6% and Netflix jumped 4%. Both of those companies have benefited from additional demand as millions of people stay home due to the coronavirus. Netflix reports its quarterly results on Tuesday after the bell.