A14 eZ re the washington post.wednesday, march 11 , 2020
not only the price of oil, but also
global financial markets.
Some analysts have even spec-
ulated that oil prices could reach
single digits, which would deci-
mate the U.S. shale oil industry
and have far-reaching effects on
producing countries that cannot
get by without healthy per-barrel
prices of $50 or higher.
“Egos and miscalculations can
lead to a much larger and adverse
economic impact if it’s not cor-
rected,” Verrastro said, adding
that the turmoil in oil markets is
broad and deep. “Markets don’t
like uncertainty, and that’s what
is going on today.
“Pretty soon, these oil compa-
nies are going to have to report
first-quarter earnings,” Verrastro
said. “That could jeopardize out-
standing bank loans. Then there
are unemployment impacts;
truckers and tankers are not
moving oil. Prices on airlines aredown, but no one is flying. We a re
going to need some signal that
Russia and Saudi Arabia can
resolve this before things get
better.”
The outbreak continues to
spread at a rapid clip, with more
than 100,000 cases worldwide.
The director of the World Health
Organization called the threat of
a coronavirus pandemic “very
real.” More than 800 cases have
been confirmed in the United
States. The outbreak is responsi-
ble for thousands of deaths
around the world.
“Today equity markets
sketched a rebound but are still
very far away f rom recovering t he
losses on the previous days,” Nan-
cy Davis, chief investment officer
of Quadratic Capital, said in an
email. “The two main sources of
risk are still out there: Coronavi-
rus and the standoff between
Saudi Arabia and Russia regard-ing potential production cuts. It
is still unclear what those two
risks could bring to global growth
and trade.”
Markets weren’t appeased af-
ter the Federal Reserve last week
delivered its first emergency rate
cut since the financial crisis. The
measure seemed to reinforce in-
vestor panic rather than quelling
it.
“We continue to see the market
get whipped around as it search-
es and thrashes looking for some
stability,” said Kenny Polcari of
SlateStone Wealth. “Until we get
clarity on both the virus and on
what the Saudis and the Russians
want to do with oil, expect the
markets to remain volatile.”
The yield on the 10-year Trea-
sury note, a staple of global
finance, remained below 1 per-
cent, although it had climbed
from record lows. The yield on
the bond is increasing becauseinvestors are fleeing stocks for
the safety of U.S. federal debt,
which is one of the safest invest-
ments on the planet. As bond
prices rise because of demand,
yields fall.
Financial managers urged
their clients to look past the
current financial maelstrom and
instead fix their gaze a decade
down the road.
“Investors need to change
their mind-set from thinking
about the next few weeks to
thinking about five to 10 years
from now,” said Clark Kendall,
president of Kendall Capital in
Rockville, Md. “A t this time, it is
most important to own financial-
ly strong companies that can
weather this virus. Just like hu-
mans, it is the physically and
financial weak that are most at
risk.”
[email protected]
[email protected]richard drew/associated Press
New York Stock Exchange traders watched the Dow turn negative after an 800-point jump, then climb back into the green, up more than
1,100 points for the day. Oil prices, which sank 25 percent Monday to their lowest levels since the 1991 Persian Gulf War, bounced back, too.the coronavirus outbreak
BY TAYLOR TELFORD
AND THOMAS HEATHAfter a shocking start to the
week, U.S. stocks on Tuesday
rallied on reports that a govern-
ment stimulus could be in the
works to help cushion the coun-
try from the economic effects of
the spreading coronavirus.
The Dow Jones industrial a ver-
age jumped 1,167 points, or 4.
percent, recovering more than
half its losses from Monday —
which was the blue-chip index’s
worst day since the 2008 finan-
cial crisis. The Standard & Poor’s
500 and tech-heavy Nasdaq com-
posite also finished near 5 per-
cent gains on Tuesday. The S&P
closed at 2,882, up 136 points.
The Nasdaq finished at 8,344, up
394 points. Financial and tech-
nology stocks were leading the
way for all 11 market sectors in
the S&P 500 index.
The market rally came in the
final hour of Tuesday’s trading
session on word that the White
House was making progress on
economic measures to help in-
dustries and workers hurt by the
coronavirus, including plans to
cut payroll taxes, relieve hourly
workers and offer targeted help
for the airline, cruise and hotel
industries. Stocks then zipped in
and out of negative territory.
“The prospect of some sort of
stimulus is a positive ray of light,”
said Sarat Sethi of Douglas C.
Lane & Associates. “The govern-
ment is acknowledging the coro-
navirus and dealing with it. That
is removing some of the uncer-
tainty and giving investors relief.”
After weeks of turbulence, U.S.
markets plunged to new depths
Monday, cratering more than
7 percent on the dual t hreat of the
outbreak’s spread in the United
States and the oil price war that
erupted between Russia and Sau-
di Arabia over production tar-
gets. The sudden, sharp drop
triggered a halt to trading for 15
minutes.
“Markets are trying to force a
policy response — from central
banks and from Washington D.C.
A basket o f more aggressive mon-
etary policy action is coming and
how markets respond is the big
question,” David Bahnsen, chief
investment officer of the Bahns-
en Group, wrote in commentary
Monday. “The market will get
something resembling ‘zero
bound’ very soon, but that is not
likely to be effective,” he contin-
ued, referring to the Federal Re-
serve lowering interest rates.
Overseas markets also re-
bounded Tuesday, with Japan’s
Nikkei 225 closing up 0.85 per-
cent and Hong Kong’s Hang Seng
climbing 1.4 percent. European
markets finished in negative ter-
ritory across the board.
Oil prices, which sank 25 per-
cent on Monday to their lowest
trading levels since the 1991 Per-
sian Gulf War, bounced back, too.
West Texas Intermediate, the U.S.
benchmark, jumped 11 percent
Tuesday. Brent crude, the inter-
national oil benchmark, gained
10 percent. Energy stocks rallied,
with Chevron, BP and Exxon -
Mobil all gaining.
Reuters reported Tuesday that
Saudi Aramco planned to raise
output to 12.3 million barrels per
day in April, flooding crude mar-
kets further and threatening U.S.
shale producers. In turn, this
could hurt oil-producing states
and make it more difficult for the
domestic economy to heal.
Frank Verrastro, senior vice
president at t he Center for Strate-
gic and International Studies,
said the standoff between the
Saudis and Russians has bluntedVolatile day ends
with stock surge on
hope of U.S. stimulus
Indexes up almost 5% as
policymakers signal plan
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