The Collapse in Crude Oil Prices Adds to the Market’s Uncertainty, Equities Dive in Concert

The Collapse in Crude Oil Prices Adds to the Market’s Uncertainty, Equities Dive in Concert

$DIA $SPY $QQQ $RUTX $USO $VXX

WTI Crude Oil settled off 10.23 (-24.8%) to 31.09 bbl for its worst decliner since Y 1991. The last time Crude Oil traded at this mark was in Y 2016.

Last Tuesday, the world’s Top financial officials pledged to use “all appropriate policy tools” to protect their economies from the coronavirus, and now investors are questioning where the central banks are.

The Fed and the BoC slashed their Key interest rates almost immediately after the G-& teleconference last Tuesday, their peers are moving much more slowly. None of the major European institutions have cut rates, nor has the BoJ,and the PBoC’s measures have been limited.

This is a far cry from the Y 2008 financial crisis, when 6 of the world’s major central banks cut rates in a coordinated move, and the BoJ issued a statement saying it supported the action.

Some policy makers may be hoping governments can take the strain with fiscal stimulus.

Today, interest rates are much lower than they were in Y 2008, and radical measures such as asset purchases and cheap long-term loans have stretched central banks abilities.

The Fed’s emergency cut last tuesday did not do what it was supposed to do, which is provide a clear support to markets. If it was coordinated perhaps it would have.

Now with the Crude Oil price crash adding to the sense of emergency, the pressure is mounting for monetary authorities to prove they have not totally exhausted their powers.

The ECB holds a scheduled policy meeting Thursday, and officials have not shown they intend to act before then. Even when they do, the measures might not be dramatic. Investors expect a 10 bspt rate cut, and some economists predict bond purchases will be boosted. A measure to direct liquidity to struggling small firms looks likely.

Monday, the major US stock market indexes finished at: DJIA -2018.40 at 23846.38, NAS Comp -624.94 at 7950.68, S&P 500 -226.24 at 2746.13

Volume: Trade on the NYSE came in at 1.9-B/shares exchanged

  • NAS Comp -11.4% YTD
  • S&P 500 -15.0% YTD
  • DJIA -16.4% YTD
  • Russell 2000 -21.1% YTD

HeffX-LTN’s overall technical outlook for the major US stock market indexes is Bearish in here.

Looking ahead: The NFIB Small Business Optimism Index for February will be released Tuesday.

Stay tuned…

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