Stocks fall as investors brace for earnings hit from coronavirus

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April 21, 2020
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Stocks fall as investors brace for earnings hit from coronavirus

U.S. stocks fell on Monday, erasing some of the market’s big gains from last week, as investors braced for a sobering first look at how the coronavirus pandemic has hurt company earnings.

The Dow Jones industrial average dropped 328.60 points to close at 23,390.77 on Monday.

The Standard & Poor’s 500 fell 1% to end at 2,761.63 after Wall Street closed out its best week in 45 years, thanks to unprecedented efforts by the Federal Reserve to support the economy through the coronavirus crisis.

Financial, health care, industrial and technology stocks bore the brunt of the selling on Monday.

The pullback followed news over the weekend that OPEC, Russia and other oil-producing nations have agreed to cut output .they are trying to stem a slide in crude prices following a collapse in demand due to the pandemic.

This week will bring a slew of first-quarter results from corporations. Those reports will provide clarity on how badly the pandemic is battering business, though much of the damage has come since the end of March.

Several major banks, including JPMorgan Chase, Wells Fargo and Bank of America, and big companies, including UnitedHealth Group, Johnson & Johnson and Rite Aid, are on deck to report results this week.

“The key to this reporting season will be corporate guidance, which is expected to be bleak,” said Peter Cardillo, chief market economist at Spartan Capital Securities. “On the other hand, the market’s recovery from its low point has been impressive but is likely to be cut short as both economic factors and technical factors weigh it down.”

Investors and analysts are looking ahead, trying to gauge when shutdowns in many countries might ease now that the number of deaths and new cases is falling or leveling off in some of the hardest-hit regions. The daily U.S. death toll from the virus dipped for the second straight day.

The U.S. numbers have surpassed 23,000 deaths – more than any other country – and 572,000 confirmed cases, according to data compiled by Johns Hopkins University. Worldwide, there were more than 100,000 deaths and 1.88 million coronavirus cases as of Monday.

Bond prices fell. The yield on the 10-year Treasury, which moves in the opposite direction to its price, rose to 0.75% on Monday from 0.72% late Thursday. U.S. markets were closed last Friday for the Good Friday holiday.

OPEC, Russia and other oil producers finalized an unprecedented production cut of nearly 10 million barrels, or a tenth of global supply, seeking to boost crashing prices and end a price war.

The oil producers agreed in a video conference late Sunday to cut 9.7 million barrels a day beginning May 1. Mexico had initially blocked the deal. Iran’s oil minister also says several Middle Eastern nations agreed to an additional cut of 2 million barrels a day.

Analysts said the cuts were not enough to make up for the void in demand due to business and travel shutdowns due to the coronavirus. But the deal at least helped resolve a price war that took U.S. crude to near $20 per barrel, pummeling U.S. oil and gas producers.

“The demand implosion is immediate and deep, while the supply decline will likely happen in stages,” analysts at Bank of America said in a note. “As a result, the impact of the OPEC+ deal on the global oil balances could take a while to work through.”

U.S. benchmark crude initially jumped more than $1 but then lost ground. It fell 35 cents to settle at $22.41 a barrel. It declined $2.33, or 9.3%, to $22.76 a barrel on Thursday, before the Good Friday holiday.

Markets in Europe were closed for the Easter holiday. In Asia, Japan’s Nikkei 225 index lost 2.3%, while the Shanghai Composite index gave up 0.5%. The Kospi in South Korea shed 1.9%.

Contributing: Jessica Menton, USA TODAY