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Market Recap: Monday, April 20

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On Monday, stocks tumbled as a dramatic cratering in crude prices stoked concerns over weak demand in an oversupplied market that’s been battered by the worldwide coronavirus outbreak.

Video Transcript

JENNIFER ROGERS: Welcome back to Yahoo Finance. I'm Jen Rogers. We are just about 30 seconds away from the closing bell on Wall Street. We've been bouncing around here at session lows coming off the best two weeks we've had since the 1930s. And looks like we're going to start this week off to the downside here. All three major indices are off in the big--

[BELL]

It's so big the oil gods wanting to stop me from talking about oil. But I can't do it. That is the closing bell on Wall Street. Sector-wise, let's talk about a little bit of what's been happening in equities. We have energy off some 3%. We've got utilities off 3.6% and real estate off 3.2%. Those are your three worst sector performers.

But, again, the story of today is what is happening in crude? I want to pull it up. And I want to go right to Jared Blikre here to walk us through what's happening. Jared, we have the May contract. It expires tomorrow. Crude is a different animal. When you buy, you know, S&P futures, you don't need to take delivery of anything.

You take delivery of oil. And if you can't, then you are being forced into a very tough position, which is what we're seeing happen here. Can you just talk about sort of the unprecedented real fall and crash that we saw this afternoon to take this negative?

JARED BLIKRE: Yeah, it's just incredible to watch. I haven't seen anything like this since the May 6, 2010 flash crash. We're seeing a drop of $50 here on the day. It's settled at negative $37. But we're talking about the May contract right here. When we go out to June, which is going to become the front month tomorrow-- and most traders are already in that-- it's trading up positive, $21.26.

So it's not as though we're going to see negative prices. For the short-term future here, now what could happen is when contracts go off the board, like, May was today. And we saw this squeeze into it. We could see something similar when June rolls over into July in one month. So that is a possibility. I mean, just take a look at the intraday price action here if I could pull it up.

And, again, this is June, 15%. But WTI in May off-- you can't even say negative 269% because that's not correct. It's a big amount, though. And it did spill over into stocks just a bit. We did see as soon as it did go negative, we saw a drop in the Dow and the other major indices. And this is the intraday price action.

But really not too much of a decline here, especially when you consider the magnitude of what's happened within an energy complex really not translating that much into stock prices. I think the market's going to shrug it off somewhat. But it could spook people a little bit. A lot of retail traders were going into oil and USO, which is the largest ETF for commodities. And they're getting burned right now. There's no other way to put it so. There is some hurt going on because of this strike, Jen.

JENNIFER ROGERS: Jared Blikre. Let's bring in my co-host Myles Udland. So Myles, Jared talking about the overall market may be shrugging this off. Or could this be something that spooks the market. You see this dislocation. And it's basically-- it's all based on demand, which we know has fallen off. We're producing way too much crude for the amount of demand that we have right now.

And we don't know what the timeline for any of that demand coming back. And that demand story can be seen in other areas of the economy as well. So do you think to Jared's point that equities will continue to brush this off because we're down a ton today.

MYLES UDLAND: I mean, look, I think what the stock market is brushing off in the abstract is immense. I mean, the fact that we're 30% off of the lows we saw. And it's funny, four weeks to the day-- four Mondays ago, we saw the lows in the S&P 500 on March 23. Now, we're seeing what-- you know, I mean, maybe they're not the lows in oil. But one imagines probably the lows in the price of crude oil.

And I think that-- so on the one hand, we've overcome so much already even to be here at this level. But at a certain point, you can't look at the most important input to global commerce basically. I mean, oil is in-- oil basically tells you, well, how much stuff is going and how far it's traveling around the globe. And for that commodity to see basically there's no bid for it. No one wants to have it. No one is using it. No one wants to store it.

People want there to be no oil that they have to be involved with other than what they already have on hand. You can't really look at that and say, oh, this economic situation isn't as bad as we think. And I do think it goes back to the thing we discussed so often on this show. And whatever. Maybe we're just the Pollyannas. But, I mean, you can't look at the stock market and not think that it's ignoring something much deeper happening in the economy.

Maybe that divergence just goes on forever. Maybe that was the divergence that happened from 2011 all the way until 2017 or 2018. And we're just going to be wrong and frustrated all the way up. But certainly the split between what the real economy looks like and how financial assets have reacted continues to widen. And I think the relative strength, the mark of particularly those tech names we've talked about so much on a day when the price of oil, again, goes basically no bid cannot be overstated.

JENNIFER ROGERS: And these were to Myles' point on the real economy. I mean, these are real companies. They have real jobs. You can't shut down your well because maybe you can't restart it. They also are levered. They have loans to the banking industry. Financials off over what the market was today. Bank of America off some 4%. JP Morgan off 3.7%. Is this a story we need to pay attention to for the broader picture?

- Yeah, I mean, and a lot of people own Chevron and XOM. And interestingly to Jared's point, you know, these stocks are actually not at their lows. Their lows were on March 23. And Exxon has gone up from 31 to 41, down about 8% today, I think. But the numbers there are pretty amazing-- 8% yield. It's got $174 billion market cap.

Compare that to what used to be its cohort of companies with market caps 10 times that all most or nine times that, which is pretty amazing, and same thing with Chevron. But today is just one of those days. It's unprecedented, historic, and bizarre. Three words that I saw come across the screen. And when you go negative like this in such a weird way, it actually messes up all kinds of algorithms and trading formulas. Things just don't make sense.

But when the IEA comes out and says that demand for oil is going to be 29 million barrels less in the month of April than before taking us back to a level from 1995, you know, 25 years sort of wiped out. I mean, it sort of reminds me of the jobs numbers-- wiping out those 22 million jobs. In a similar way, it's very much of an apples and oranges there. But it just sort of gives you an idea of the magnitude of the carnage that we're looking at, Jen.

RICK NEWMAN: Hey, guys. It's Rick. I'm going to jump in. Do you remember how this slide in oil began just a few weeks back? With this spat between Russia and Saudi Arabia, and nobody wanted to cut production. And they were deliberately trying to drive down the price. And then President Trump got involved. And just a few days ago, he said he made a deal with his pal Mohammed bin Salman.

And there was going to be a production quota. And this supposedly was going to push prices back up. That has just been completely blown out of the water. It makes me wonder, is Saudi Arabia happy with the price of oil right now? What does anybody think about that?

JENNIFER ROGERS: Oh, boy, Rick Newman. We're going to have to do a Friday special and dive into that. That is a big bit to chew off. I think there is-- this is a-- as Myles says this is a global commodity and a global story as well.

MYLES UDLAND: But remember, they're a diversified services economy now, Rick. And BS has this old over thing going on. So it's fine.