Wall Street stock indexes resumed their slide on Tuesday, as gloomy quarterly earnings reports and a historic collapse in U.S. crude prices raised the specter of a deep global recession.
At 12.08pm, the Dow Jones Industrial Average was down 616.43 points, or 2.61 percent, at 23,034.01. The S&P 500 and Nasdaq Composite were both down more than 2 percent in midday trading.
President Donald Trump said on Tuesday morning that the federal government would support the energy industry in the U.S., which is the world’s top oil producer.
‘We will never let the great U.S. Oil & Gas Industry down. I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!’ Trump said in a tweet.
The May contract for West Texas Intermediate crude swung positive after dipping below zero on Monday, as investors worried about full storage facilities and a collapse in demand as the coronavirus pandemic leaves factories, automobiles and airplanes idle.
June contracts, more actively traded and a better indication of where markets see oil prices going, remained positive at $15.88 on Tuesday morning despite a plunge of nearly 30 percent.
Facilities Supervisor Mark Casalinuovo rings the opening bell on the New York Stock Exchange on Tuesday, paying tribute to the workers at a Lowe’s in Newburg, New York
Negative prices on the May WTI contract, an unprecedented event, meant that traders were paying other investors to take the contracts off their hands in order to avoid having to take delivery of oil next month.
With the May contracts expiring on Tuesday, hedge funds and other paper traders were desperately trying to unload the contracts in order to avoid becoming physical buyers.
So few buyers were interested that the price of the contracts flipped negative, with sellers paying to get rid of them.
For consumers, the turmoil in oil contracts will not mean negative prices at the gas pump, however — though gas prices in many states remain at multi-year lows, with stations in at least 13 states selling gas for less than $1 a gallon.
Exxon Mobil Corp shed 3.9 percent in premarket trading and Chevron Corp slipped 3.6 percent.
June contracts also fell by $7, or 35 percent, at midday on Tuesday, signalling more weakness in demand in the face of a near halt in global activity.
Pump jacks are seen in Midland, Texas earlier this month. May WTI contracts remained negatively priced on Tuesday, though the June contracts were trading positive
‘Yesterday, the historic oil crash had a limited impact on U.S. stocks, but that won’t be the case going forward as the rolling of contracts won’t wait so close to expiry,’ said Edward Moya, market analyst at OANDA.
‘Oil prices will remain heavy in the short-term and since many energy stocks have recently rebounded, they are ripe to see a lot of pain this week.’
Other oil-related companies including Apache Corp, Halliburton Co, ConocoPhillips, Schlumberger and Occidental Petroleum Corp tumbled between 4.5 percent and 6 percent.
The benchmark S&P 500 index has climbed over 25 percent from a March low, powered by trillions of dollars in stimulus, but still remains nearly 17 percent below its record high amid fears of the biggest economic slump since the Great Depression.
Dismal 2020 forecasts from big U.S. banks kicked off the first-quarter U.S. corporate earnings season and major companies have since announced dividend cuts and withdrawn financial outlooks.
The New York Stock Exchange is seen on Monday. The trading floor remains closed due to the coronavirus pandemic and all trades are conducted online
Analysts expect a corporate recession this year with earnings for S&P 500 firms falling 13.5 percent in the first quarter and 29.1 percent in the second, according to IBES data from Refinitiv.
Coca-Cola provided the latest evidence of the damage wrought by the pandemic, saying its current-quarter results would take a severe hit from low demand for sodas.
Travelers Companies fell 1.7 percent, after the insurer reported a 25 percent fall in quarterly profit, hurt by higher catastrophe losses from a string of tornadoes and storms, as well as claims related to coronavirus.
Among other Dow components, IBM slid 4.9 percent after the company withdrew its 2020 annual forecast late on Monday.
Lockheed Martin Corp, the Pentagon’s top weapons supplier, rose 1.4 percent after reporting a 9.2 percent rise in quarterly revenue, helped by higher sales in its aeronautics unit that makes the F-35 fighter jets..
Chip industry bellwether Texas Instruments is set to report its first-quarter earnings later in the day.