The Stock Market Is Tumbling Again as Oil Feud Adds Fuel to Coronavirus Fire

Stock futures are falling once again on coronavirus fears.

Drew Angerer/Getty Images

6:21 p.m. U.S. stock futures are in free fall Sunday evening as the market wrestles with the spread of coronavirus in the U.S. and slumping oil prices.

Dow Jones Industrial Average futures have fallen 915 points, or 3.6%, while S&P 500 futures have slumped 3.8%, and Nasdaq Composite futures have dropped 3.7%.

Is that really a surprise? The weekend has brought a lockdown in Northern Italy, a state of emergency in New York state, and the continued spread of coronavirus. At this point, the only thing that’s uncertain for the economy is the size of the hit, not whether there will be one.

Yet as the market continues to panic, the U.S. government has not. Washington has yet to consider much in the way of stimulus. Larry Kudlow, director of the National Economic Council, said that helping hard-hit industries and small businesses in specific areas was likely, but that a big stimulus package “never works.” That lack of panic, says Evercore ISI’s Dennis DeBusschere, raises the odds that something goes very wrong for the market. “Unfortunately, when everyone except the U.S. government is panicking, market tail risk increases, feeding the unusually high level of volatility,” he writes.

And it’s not just the coronavirus we have to worry about. After failing to reach a deal with Russia to limit oil production, Saudi Arabia announced that it plans to open the spigots to drill, baby, drill. That could cause major problems for U.S. oil drillers. Oil prices closed just above $40 a barrel, and is down 22% to $32.18 in futures trading. “The Energy market has already been in free fall as markets adjusted for the reemergence of a global supply glut and the feared demand destruction that would be associated with a potential global recession,” writes JonesTrading’s Michael O’Rourke. “Due to Energy’s shrunken weighting in the index, the ramifications are more likely to be felt in the Banks and rapidly deteriorating loan quality.”

O’Rourke explains that banks are likely prepared for that eventuality. But it is just one more thing being added to the mess that is the financial markets right now.

Write to Ben Levisohn at Ben.Levisohn@barrons.com

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