Dow Sinks 2,000 Points, or 7.78%, Amid Oil Price War, Economic Fallout From Coronavirus

U.S. stocks and global stocks sank and bond yields fell sharply amid an oil price war and the economic fallout from the coronavirus.
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  1. U.S. and global stocks sank and bond yields fell sharply. Investors' fears about the spread of the coronavirus deepened and oil prices tumbled as producers argued about how to cut production and lift prices in the face of weaker demand.
  2. Coronavirus update: The number of confirmed global cases of the coronavirus has risen to 113,579, according to the Johns Hopkins Center for Systems Science and Engineering, and nearly 4,000 people have died. The U.S. has 607 cases of the virus and the disease has killed 22 people.
  3. The energy sector is Real Money's Stock of the Day as oil prices plunged and Saudi Arabia and Russia argued about production cuts.

Stocks tanked Monday, global stocks sank and bond yields were sharply lower as investors' fears about the spread of the coronavirus deepened and oil prices plunged as producers argued over how to cut production and lift prices in the face of weaker demand.

Stock trading was halted shortly after the opening bell Monday. Circuit breakers kicked in once the S&P 500 declined 7%.

The Dow Jones Industrial Average finished down 2,013 points, or 7.78%, to 23,851, the S&P 500 declined 7.6% and the Nasdaq sank 7.29%. The Dow had its worst day since December 2008.

With global coronavirus infections rising to 113,579 and the death toll from coronavirus Covid-19 just below 4,000, global investors can no longer ignore the virus's impact on the world economy. 

Compounding the global market selloff was a dramatic fall Monday in government-bond yields. The yield on the benchmark 10-year U.S. Treasury slumped to an all-time low of 0.318% overnight, one of the sharpest declines since the financial crisis. At last check, the yield was 0.58%.

Investors were betting Monday that the Federal Reserve will need to slash rates a further 75 basis points when it meets next week in Washington - following last week's emergency cut of 50 basis points - to inoculate the U.S. economy against Covid-19's destruction.

"The biggest fear investors have right now is that this selloff is different than others," said Nancy Davis, chief investment officer of Quadratic Capital and portfolio manager for the  (IVOL) - Get Report exchange-traded fund. 

"It isn't clear to me that any amount of rate cuts or quantitative easing will have much of an effect when the underlying issue is health-related."

Prices for Brent crude, the international benchmark, were down 23.9% Monday to $34.46 a barrel and West Texas Intermediate crude slumped 25.1% to $30.94 a barrel after negotiations between OPEC and Russia broke down and Saudi Arabia launched a price war and vowed to boost production to lift its market share.

"The oil-price collapse adds a new dimension for fear and uncertainty. You really couldn’t make up a worse combination for uncertainty," said David Bahnsen, chief investment officer of Bahnsen Group. 

"The markets not only have to worry about the impact on capital expenditures and credit markets, but truth be told, they have to wonder what [Russian President Vladimir] Putin’s angle really is."

The sharp drop in oil prices Monday - the worst since 1991 - followed declines of more than 10% on Friday. 

OPEC talks collapsed as cartel leaders and non-member allies such as Russia failed to deepen a pact on production cuts. They also allowed their current agreement, which takes 1.2 million barrels from the market each day, to expire.

Saudi Arabia, in what many analysts see as a tactic designed to punish Russia for its failure to support OPEC's proposal, has begun slashing prices just as demand weakens as economies slow amid the coronavirus crisis.

Shares of oil majors Exxon Mobil  (XOM) - Get Report, Chevron  (CVX) - Get Report and BP  (BP) - Get Report plunged Monday as crude prices tumbled. Marathon Petroleum  (MRO) - Get Report and Occidental Petroleum  (OXY) - Get Report also slumped.

The number of confirmed global cases of the coronavirus has risen to 113,579, according to the Johns Hopkins Center for Systems Science and Engineering, and deaths sit at 3,995.

The U.S. has 607 cases of the virus and deaths have climbed to 22.

Join Jim Cramer's special Action Alerts PLUS members-only call to prepare your investment strategy during the economic fallout from the coronavirus and as oil prices fall amid a price war.