Dow, S&P 500 futures down about 2% as investors weigh global lockdown easings, tanking oil

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April 20, 2020
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April 20, 2020

Dow, S&P 500 futures down about 2% as investors weigh global lockdown easings, tanking oil

U.S. stock-index futures early Monday headed sharply lower, in thinly traded action, as investors assessed the staggered plans for the reopening of economies all over the world in the wake of the COVID-19 pandemic.

Investors were also watching reports on progress on obtaining additional funds for small businesses and workers hurt by the worst viral outbreak in a century.

How are benchmarks performing?

Futures for the Dow Jones Industrial Average YMM20, -2.08% were off 512 points, or 2.1%, at 23,662, while S&P 500 futures ESM20, -1.89% were down 54.85 points, or 1.9%, at 2,813.25 and Nasdaq-100 futures NQM20, -0.99% were off 78.25 points, or 0.9%, at 8,730.25.

The benchmarks are coming off a strong week, where the Dow DJIA, +2.99% gained 2.2%, the S&P 500 SPX, +2.67% advanced 3% and the Nasdaq Composite Index COMP, +1.38% put in a weekly return of 6.1% on Friday.

What’s driving the market?

Investors have been paying attention to signs of peak infections in parts of the world, including New York, and were watching for plans from Europe, notably Germany, to begin unwinding a weekslong economic pause due to the pandemic.

New York Gov. Andrew Cuomo on Sunday said that the state on Monday will begin conducting antibody tests to help determine how many New Yorkers were infected COVID-19, as a part of the Empire State’s efforts to reopen its economy. Such testing is a major feature of Germany’s plans to restart its economy on Monday.

It is still unclear if the presence of antibodies for the novel strain of coronavirus signifies immunity, experts say, but testing has been viewed as part of a larger effort to better understand the spread of the deadly illness.

Global infections of COVID-19 have exceeded 2.4 million, with more than 165,000 lives lost to the contagion that was first identified in China in December.

Meanwhile, Democratic lawmakers and Treasury Secretary Steven Mnuchin said they were close to striking a deal to replenish a roughly $350 billion small-business recovery program, according to reports.

Read:Coronavirus creates a market of ‘haves and have-nots,’ with the Dow posting its best 2-week run in 82 years amid 22 million job losses

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Despite some of the ground the market has made up since hitting a March 23 low, bets for further weakness are at their highest in more than three years.

Markets also may be looking to take a pause when Monday trade gets under way, with investors showing heightened expectations that the market will fall after the Dow put in its best two-week stretch of gains since 1938, according to Dow Jones Market Data.

Short bets against the popular SPDR S&P 500 Trust SPY, +2.70% rose to more than $68 billion last week, marking the highest level since 2016, according to The Wall Street Journal, citing data from analytics firm S3 Partners.

Investors are bracing for the worst quarter for earnings since the 2008 financial crisis, unsurprisingly due to closures in response to the COVID-19 pandemic. Results this year for the first-quarter are on track to decline 14.5% from a year ago, according to John Butters, senior earnings analyst at FactSet, which would mark the biggest decline since the 15.7% plunge in the third quarter of 2009.

Separately, crude-oil futures CL.1, -37.82% were seeing prices continue to put in multiyear lows as worries about demand due to the fallout from COVID-19 punished prices, raising concerns about the health of members of the oil-and-gas sector.

Peter Cardillo, chief market economist at Spartan Capital Securities, in a Monday research note, said that the sharp drop in oil prices is potentially dangerous “situation for the U.S. economy and stock market, as the risk of job’s and geopolitical problems mount.”

Which stocks are in focus?

International Business Machines CorpIBM, +3.79% is set to report earnings Monday, with analysts surveyed by FactSet expecting it to report first-quarter revenue of $17.8 billion, down from the $18.18 billion reported in the year-ago period. Shares of IBM were down 0.4% before the opening bell.

Shares of Wynn Resorts LtdWYNN, +8.53% will be in focus after Chief Executive Officer Matt Maddox, on Sunday called for the Las Vegas Strip to reopen in mid- to late May, with certain restrictions. Shares of Wynn were down 1.7% in premarket trade Monday.

Neiman Marcus Group is preparing to file for bankruptcy as soon as this week, Reuters reported Sunday. Neiman was acquired in 2013 by Ares Management LLC ARES, +3.97% and the Canada Pension Plan Investment Board.

Shares of DuPont de Nemours Inc. DD, +5.90% rose in premarket trading after it said it would tap its bank credit facilities, delay certain spending and suspend its full-year guidance.

Novartis AG NVS, +1.99%, the Swiss pharmaceutical, said it would conduct a Phase III clinical trial of hydroxychloroquine in hospitalized patients with COVID-19 disease, after reaching an agreement with the U.S. Food and Drug Administration. The antimalaria drug is one that President Donald Trump has repeatedly touted as a potential treatment for coronavirus. The U.S.-listed shares in premarket were up a slight 0.3%.

Shake Shack IncSHAK, +1.32% will return the $10 million loan the fast-food chain received as part of the CARES Act relief for small businesses, the company said early Monday. Share of the company were down 3.5% in the premarket.

How are other markets trading?

May futures for U.S. crude CLK20, -37.88% on the New York Mercantile Exchange fell nearly 30%, or $5.36, to trade at $12.88 a barrel, around its lowest since 2001. The May contract will expire on Tuesday.

Bonds received some safe haven inflows, with the 10-year Treasury note yield TMUBMUSD10Y, 0.613% down 1.8 basis points to 0.638%, Tradeweb data shows. Bond prices move in the opposite direction of yields.

The dollar strengthened 0.2% against its major rivals, based on trading for the ICE U.S. Dollar index DXY, 0.16%