Dow sank 2013 (close to session lows), only 2% of stocks reported gains today & NAZ plunged 624. The MLP index tumbled a mindbogglingly 41 to 114 (again, about 25 years ago, the index began at 100) & the REIT index tumbled over 27 to the 369s. Junk bond funds were hit with heavy selling & Treasury yields plunged with the 10 year Treasury yield around 0.5% (more below). Oil dropped an astounding 10, going below 31 & gold rose 5 to 1677 (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
Oil prices plunged to multi-year lows as tensions between Russia & Saudi Arabia escalate, sparking fears that an all-out price war is imminent. The sell-off in crude began last week when OPEC failed to strike a deal with its allies, led by Russia, about oil production cuts. That, in turn, caused Saudi Arabia to slash its oil prices as it reportedly looks to ramp up production. West Texas Intermediate (WTI) crude & intl benchmark Brent crude posted their worst day since 1991. WTI plunged 24% ($10.15) to settle at $31.13 per barrel, its 2nd worst day on record. Intl benchmark Brent crude slid $9.65 (21%) to trade at $35.58 per barrel. Earlier in the session WTI dropped to $30 while Brent traded as low as $31.02, both of which are the lowest levels since Feb 2016. On Sat, Saudi Arabia announced massive discounts to its official selling prices for Apr & the nation is reportedly preparing to increase its production above the 10M barrel per day mark. The kingdom currently pumps 9.7M barrels per day, but has the capacity to ramp up to 12.5M barrels per day. Saudi Arabia's price cut followed a breakdown of talks in Vienna last week. On Thurs, OPEC recommended additional production cuts of 1.5M barrels per day starting in Apr & extending until the end of the year. But OPEC ally Russia rejected the additional cuts when the 14-member cartel & its allies, known as OPEC+, met on Fri. The meeting also concluded with no directive about the production cuts that are currently in place but set to expire at the end of the month. This effectively means that nations will soon have free rein over how much they pump. “As from 1 April we are starting to work without minding the quotas or reductions which were in place earlier,” Russian Energy Minister Alexander Novak told reporters Fri, adding, “but this does not mean that each country would not monitor and analyze market developments.” Oil prices have already moved sharply lower this year as the coronavirus outbreak has led to softer demand for crude. A potential supply glut could pressure prices further.
Oil plunges 24% for worst day since 1991, hits multi-year low after OPEC deal failure sparks price war
Gold futures booked a moderate rise as global markets were in a free fall, partly sparked by a plunge in crude-oil prices & mounting concerns about the spread of the infectious disease COVID-19. Gold for Apr picked up $3.30 at $1675, after bullion put in a 6.79% gain last week, representing its largest weekly rise for a most-active contract since 2011. Global markets were in turmoil which have reached a fresh peak after Russia & OPEC failed to strike an agreement on deeper crude production cuts. In response, Saudi Arabia slashed crude prices & was looking to ramp up production, a move that is intended to cement its market share, leading investors to worry about a price war that has already could sent shock waves throughout markets. The problems around oil come as infections of COVID-19 are growing & threatening to put a further dent in global supply chains & economies. Markets were already reeling from the epidemic that was first identified in Dec in Wuhan, China. So far, 111K cases have been identified, claiming 3900 lives. Gold prices had been at an intraday peak at $1704 an ounce, but pulled back, leading some analysts to speculate that traders are readjusting their portfolios amid a market rout that may result in some margin calls.
A flight to the perceived safety of Treasuries drove yields deeper toward historic lows & pushed prices sharply higher as a breakdown in talks between major oil exporters sparked a potent decline in oil prices, delivering a shock to investors in assets considered risky including stocks. The rising number of COVID-19 cases in the US also threatened to hamper consumer demand, the linchpin of the US economy. The 10-year Treasury note yield fell 18.3 basis points to 0.524%, hitting an intraday record low of 0.339% in overnight trading, while the 2-year note rate was down 7.6 basis points to 0.401%. The 30-year bond yield slipped 28.5 basis points to 0.930%, a record. Bond prices move in the opposite direction of yields. All 3 maturities are trading below 1% for the first time in history. Talks between Russia & OPEC failed spectacularly. Moscow refused to agree to deeper cuts in response to demand shock represented by the coronavirus. In response, Saudi Arabia slashed crude prices & was looking to ramp up production, a move that would cut into Russia's market share. The disagreement between the major oil exporters sparked the biggest one-day slump in crude-oil prices since the 1991 Gulf War, & sent global equity markets lower. Safe-haven assets like Treasuries saw sharp bidding, with the longer-term maturities seeing the sharpest rally as energy prices are closely tied to inflation expectations. Rising inflation is anathema to bonds & a rapid decline, such as a drop in crude values, can underpin demand for gov paper. The 10-year break-even rate, expectations for consumer prices as indicated by trading for Treasury inflation-protected securities, fell to its lowest level since 2009. The combined oil price-war shock & growing concerns about the outbreak of the infectious disease that was first identified in Dec in Wuhan, China has caused a broad-based aversion to risky assets because the outcome of both events is uncertain.
Gloomy days have become common in the last couple of weeks. However, today's performance was in a class by itself. A couple of weeks ago, the Dow was pushing for 30K & the NAZ had its eyes on 10K (a major accomplishment for the Dow years ago). Now the Dow is under 24K & NAZ is below 8K. The Volatility Index (VIX) sky-rocked to 55 (40 above where it was in better times last year). Risky investments (stocks) are not welcomed. The growing importance of the virus is one major factor for the selling. However, the main driver behind fear & heavy selling is the collapse in the oil market with seemingly no end in sight. Supply is growing while demand looks to be declining. Travel is being clobbered with restrictions. Airline & cruise ship company stocks are being sold. The major auto companies are selling at 52 week lows. Quibbling about at what level the averages have to retreate to for a 20% decline from the previous peaks (official mark for a bear market) means little. The averages are basically there & the outlook continues to be dreary. For long term investors, buying opportunities are being created. But there are plenty of headwinds over the short term. The disparity between supply & demand for oil will take time to sort out & the interim period will be painful for global economic activity.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
Oil prices plunged to multi-year lows as tensions between Russia & Saudi Arabia escalate, sparking fears that an all-out price war is imminent. The sell-off in crude began last week when OPEC failed to strike a deal with its allies, led by Russia, about oil production cuts. That, in turn, caused Saudi Arabia to slash its oil prices as it reportedly looks to ramp up production. West Texas Intermediate (WTI) crude & intl benchmark Brent crude posted their worst day since 1991. WTI plunged 24% ($10.15) to settle at $31.13 per barrel, its 2nd worst day on record. Intl benchmark Brent crude slid $9.65 (21%) to trade at $35.58 per barrel. Earlier in the session WTI dropped to $30 while Brent traded as low as $31.02, both of which are the lowest levels since Feb 2016. On Sat, Saudi Arabia announced massive discounts to its official selling prices for Apr & the nation is reportedly preparing to increase its production above the 10M barrel per day mark. The kingdom currently pumps 9.7M barrels per day, but has the capacity to ramp up to 12.5M barrels per day. Saudi Arabia's price cut followed a breakdown of talks in Vienna last week. On Thurs, OPEC recommended additional production cuts of 1.5M barrels per day starting in Apr & extending until the end of the year. But OPEC ally Russia rejected the additional cuts when the 14-member cartel & its allies, known as OPEC+, met on Fri. The meeting also concluded with no directive about the production cuts that are currently in place but set to expire at the end of the month. This effectively means that nations will soon have free rein over how much they pump. “As from 1 April we are starting to work without minding the quotas or reductions which were in place earlier,” Russian Energy Minister Alexander Novak told reporters Fri, adding, “but this does not mean that each country would not monitor and analyze market developments.” Oil prices have already moved sharply lower this year as the coronavirus outbreak has led to softer demand for crude. A potential supply glut could pressure prices further.
Oil plunges 24% for worst day since 1991, hits multi-year low after OPEC deal failure sparks price war
Gold futures booked a moderate rise as global markets were in a free fall, partly sparked by a plunge in crude-oil prices & mounting concerns about the spread of the infectious disease COVID-19. Gold for Apr picked up $3.30 at $1675, after bullion put in a 6.79% gain last week, representing its largest weekly rise for a most-active contract since 2011. Global markets were in turmoil which have reached a fresh peak after Russia & OPEC failed to strike an agreement on deeper crude production cuts. In response, Saudi Arabia slashed crude prices & was looking to ramp up production, a move that is intended to cement its market share, leading investors to worry about a price war that has already could sent shock waves throughout markets. The problems around oil come as infections of COVID-19 are growing & threatening to put a further dent in global supply chains & economies. Markets were already reeling from the epidemic that was first identified in Dec in Wuhan, China. So far, 111K cases have been identified, claiming 3900 lives. Gold prices had been at an intraday peak at $1704 an ounce, but pulled back, leading some analysts to speculate that traders are readjusting their portfolios amid a market rout that may result in some margin calls.
Gold logs slight gain as global stocks and oil routed
A flight to the perceived safety of Treasuries drove yields deeper toward historic lows & pushed prices sharply higher as a breakdown in talks between major oil exporters sparked a potent decline in oil prices, delivering a shock to investors in assets considered risky including stocks. The rising number of COVID-19 cases in the US also threatened to hamper consumer demand, the linchpin of the US economy. The 10-year Treasury note yield fell 18.3 basis points to 0.524%, hitting an intraday record low of 0.339% in overnight trading, while the 2-year note rate was down 7.6 basis points to 0.401%. The 30-year bond yield slipped 28.5 basis points to 0.930%, a record. Bond prices move in the opposite direction of yields. All 3 maturities are trading below 1% for the first time in history. Talks between Russia & OPEC failed spectacularly. Moscow refused to agree to deeper cuts in response to demand shock represented by the coronavirus. In response, Saudi Arabia slashed crude prices & was looking to ramp up production, a move that would cut into Russia's market share. The disagreement between the major oil exporters sparked the biggest one-day slump in crude-oil prices since the 1991 Gulf War, & sent global equity markets lower. Safe-haven assets like Treasuries saw sharp bidding, with the longer-term maturities seeing the sharpest rally as energy prices are closely tied to inflation expectations. Rising inflation is anathema to bonds & a rapid decline, such as a drop in crude values, can underpin demand for gov paper. The 10-year break-even rate, expectations for consumer prices as indicated by trading for Treasury inflation-protected securities, fell to its lowest level since 2009. The combined oil price-war shock & growing concerns about the outbreak of the infectious disease that was first identified in Dec in Wuhan, China has caused a broad-based aversion to risky assets because the outcome of both events is uncertain.
Treasury yield curve sinks below 1% after oil and coronavirus worries rout stocks
Gloomy days have become common in the last couple of weeks. However, today's performance was in a class by itself. A couple of weeks ago, the Dow was pushing for 30K & the NAZ had its eyes on 10K (a major accomplishment for the Dow years ago). Now the Dow is under 24K & NAZ is below 8K. The Volatility Index (VIX) sky-rocked to 55 (40 above where it was in better times last year). Risky investments (stocks) are not welcomed. The growing importance of the virus is one major factor for the selling. However, the main driver behind fear & heavy selling is the collapse in the oil market with seemingly no end in sight. Supply is growing while demand looks to be declining. Travel is being clobbered with restrictions. Airline & cruise ship company stocks are being sold. The major auto companies are selling at 52 week lows. Quibbling about at what level the averages have to retreate to for a 20% decline from the previous peaks (official mark for a bear market) means little. The averages are basically there & the outlook continues to be dreary. For long term investors, buying opportunities are being created. But there are plenty of headwinds over the short term. The disparity between supply & demand for oil will take time to sort out & the interim period will be painful for global economic activity.
Dow Jones Industrials
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