Anxiety is ruling on Wall Street again, as investors fret over a lack of clarity surrounding White House fiscal stimulus measures to combat the economic fallout of the new coronavirus.
The Dow Jones Industrial Average opened down 700 points, swooned higher, then turned tail to extend its opening bell losses in what promises to be another volatile trading day.
The S&P 500 index – a barometer for US retirement accounts and college savings plans – fell 2.67 percent at the open, while the Nasdaq opened down more than 2 percent.
All three major United States stock indexes are flirting with “bear market” territory, defined by a loss of 20 percent or more from recent highs.
Energy stocks continued to feel pain, as the oil price war triggered by Saudi Arabia over the weekend continued to spell trouble for the balance sheets of US fossil fuel firms.
On Wednesday, Saudi Arabia and fellow OPEC member the United Arab Emirates both announced plans to pump crude even more vigorously, starting next month.
The Saudi energy ministry directed state oil giant Aramco to raise its output capacity from 12 million barrels per day (bpd) to 13 million bpd, while the UAE’s state oil company ADNOC said it would raise its output to 4 million bpd in April and accelerate moves to ramp up to 5 million bpd.
Also on Wednesday, the US Energy Information Administration (EIA) said global oil demand is set to dive by 910,000 bpd in the first three months of this year, and cut its forecast for world oil demand this year by 660,000 a day. While the EIA still sees a slight uptick in demand for 2020, the Paris-based International Energy Agency on Monday said on Monday that it now believes annual oil demand this year will fall for the first time since the global financial crisis.
Global benchmark Brent crude fell below $37 a barrel in mid-morning trading in New York, while US benchmark West Texas Intermediate crude was trading down 2.3 percent at around $33 a barrel.
Opacity surrounding “major” economic stimulus measures promised by President Donald Trump this week to offset the negative impacts of coronavirus disruptions is fuelling uncertainty among businesses and investors.
On Tuesday, Trump suggested lowering the payroll tax to zero and keeping it there until at least the end of the year, but whether and how such a policy would unfold is still unclear.
A cut in payroll taxes would help businesses and leave more money in workers’ paychecks, helping them cope with coronavirus work disruptions and encouraging them to keep spending. Some two-thirds of US economic growth is driven by consumer spending.
Shares of Boeing corporation fell 9 percent after reports surfaced that the planemaker plans to draw down all of a $13.8bn loan as it wrestles with global travel disruptions in the face of the coronavirus.