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Scotia Wealth Management

Volatile Oil Prices Take Investors on Wild Ride

Market Watch – April 24, 2020

April 24, 2020

U.S. stocks declined sharply on Monday, signaling the start of another volatile week, after U.S. crude futures entered negative territory for the first time in history. The front-month May futures contract ended the day at negative $37 a barrel, leaving some producers having to pay buyers to take oil away or store it, as oil demand nearly vanishes in light of the pandemic. Year to date, the S&P energy index has lost 45%, by far the worst performer among 11 sectors. By Monday’s close, the Dow had dropped nearly 600 points, while the Nasdaq shed 89. Despite oil’s continued fall, the TSX climbed 28 points, buoyed by rising sentiment for Shopify, which climbed nearly 7% on the day.

It was another rough day Tuesday as further declines in oil prices dragged down everything from stocks to currencies, adding even more urgency to the crisis sweeping the energy industry. Major U.S. indexes opened sharply lower and continued falling in afternoon trading as the oil selloff gained steam. The Dow plunged over 600 points Tuesday, while the TSX fell more than 3%, and the loonie dropped to a near three-week low. Even gold declined, as investors scrambled for cash to cover other positions.

N.A. markets rallied Wednesday, however, to claw back some of the week’s losses, as Brent crude was up nearly 6% for the day. Adding to the positive sentiment was news that U.S. lawmakers were on track to approve roughly $500 billion in aid for U.S. small businesses struggling from the impact of the coronavirus outbreak. By Wednesday’s close, the TSX was up nearly 350, while the Dow jumped almost 500.

Positive sentiment continued on Thursday as signs of progress against the virus are fuelling hopes that many local economies could soon begin to ease lockdown measures. There was also more good news as oil prices climbed on signs of recovering demand in China, and weekly U.S. jobless claims appeared to be easing–although the total over the last five weeks has now reached 26 million. By Thursday’s close, U.S. and Canadian indexes essentially finished flat.

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