Dow Futures Slump Lower, U.S. Crude Extends Historic Decline As Coronavirus Chokes Global Demand

Global crude prices continued to crash Tuesday, shaking investor sentiment in markets around the world and setting up a weaker open on Wall Street.

The Tuesday Market Minute

  • Global stocks slide as crude collapse rattles investors and limp earnings underscore extent of coronavirus damage to the economy.
  • US crude futures for June, the new base contract, fall below $19 a barrel as investor appetite evaporates following the first negative close for any contract last night.
  • Brent crude falls below $20 a barrel, the lowest since 2002, as price collapse hits global benchmark. 
  • President Trump says he's considering a ban on Saudi imports as domestic inventories swell, adding further pressure to global markets.
  • Congressional leaders plan Tuesday vote on $450 billion in support for small business and hospitals damaged by the coronavirus pandemic.
  • Wall Street futures suggest a weaker open ahead of first quarter earnings from Coca-Cola, Lockheed Martin and Travelers before the bell and Netflix after the close of trading.

U.S. equity futures slumped lower Tuesday as oil extended its historic collapse and lawmakers moved towards a vote that could secure some $450 billion in small business and hospital funding 

Last night's close for U.S. crude prices, which saw holders of May delivery contracts paying buyers more that $37.60 per barrel to take delivery of the oil they would otherwise have to buy, shattered confidence in global financial markets and rippled through asset prices all over the world. 

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, jumped 0.34% in overnight trading to 100.298, while benchmark 10-year U.S. Treasury note yields fell to 0.55% as investors plowed cash into safe-haven corners of the global financial markets.

Oil continued to dictate that direction of overnight equity trading, as well, after President Donald Trump said late Monday that he might block imports from Saudi Arabia in order to stem the flow of cheap crude into the world's biggest economy.

"The problem is no one is driving a car anywhere in the world, essentially. ... Factories are closed, businesses are closed," Trump told reporters in Washington. "We had really a lot of energy to start off with, oil in particular, and then all of a sudden they lost 40%, 50% of their market," he added, referring to estimates of the fall in global demand.

Front-month WTI futures contracts -- the new benchmark for U.S. prices that would have owners taking delivery of crude in June -- tumbled $6 per barrel to $14.46. Brent futures for June delivery, meanwhile, which benchmark around 60% of global crude purchases, were marked $5.44 lower at $20.13 per barrel after briefly trading as low as $18.10 per barrel. 

The crude oil moves, as well as the dollar's overnight rally, pressured equity prices in Europe and Asia and pressed on U.S. equity futures heading into the start of the trading session.

Contracts tied to the Dow Jones Industrial Average, which tumbled nearly 600 points on Monday, are priced for a 615 point opening bell decline while those linked to the S&P 500, which lost 51.4 points in yesterday's session, are indicating another 57 point pullback. 

Support later in the session, however, could come from Congress, which is expected to vote today on a package that would provide some $450 billion in near-term support for small businesses and hospitals challenged by the coronavirus pandemic, which has now infected some 760,000 Americans and taken the lives of at least 42,000.

Earnings are also expected from blue-chip names such as Coca-Cola  (KO) - Get Report, Lockheed Martin  (LMT) - Get Report, and Travelers  (TRV) - Get Report before the bell, while Netflix  (NFLX) - Get Report will unofficially kick off tech earnings for the quarter after the close of trading.  

Overnight in Europe, energy shares kept regional benchmarks in the red, with the Stoxx 600 falling 2.5% and Britain's FTSE 100 sliding 2.2%.

In Asia, Japan's Nikkei 225 tumbled nearly 2% while the region-wide MSCI ex-Japan benchmark was last seen 2.3% lower heading into the final hours of trading.