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After the Bell: Market Meltdown

John Divine

The gods of Wall Street, if they exist, sure do have a twisted sense of humor. Eleven years to the day since the longest-ever bull market began, U.S. stocks practically imploded, with the three major indices each losing more than 7%.

The decline was so dramatic that it triggered an arcane feature of the modern stock market: The circuit-breaker rule, which halts all trading anytime stocks fall 7% below their previous close. Meant to give traders some time to rethink and calm the panic, the 15-minute halt went into effect at 9:34 a.m., marking the first such mandatory halt to trading since 1997.

Oil in free fall as the inevitable pandemic worsens. This is not a good combination of events for markets. A high-stakes game of chicken between Saudi Arabia and Russia is to blame for plunging oil prices, which fell 25% on Monday after Saudi Arabia's Aramco slashed oil prices over the weekend after it couldn't come to terms with Russia on a proposal to cut production. The Organization of the Petroleum Exporting Countries, or OPEC, often uses production cuts to keep the bottom from falling out of oil prices.

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A cascading ripple effect. The sudden decline in oil prices instantly put many U.S. shale producers, many of them highly leveraged, into dangerous territory. Credit spreads, the difference between yields in high- and low-quality bonds, expanded, a bearish sign that could indicate a looming credit crunch if things don't improve. Defaults could also infect parts of the U.S. financial system.

Always look on the bright side of life. There were at least a handful of companies in the S&P 500 that saw their stock advance. Car parts retailer AutoZone ( AZO) was the best performer, advancing 5% on the day as markets see economic concerns causing consumers to adopt a more do-it-yourself attitude when it comes to vehicles. Dollar Tree ( DLTR) shares also rose 4.1% as investors piled into the distributor of consumer staples.

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