Wall Street tumbled on Monday after U.S. crude futures turned negative for the first time in history, underscoring the chaos the coronavirus outbreak has unleashed on the global economy. The Canadian stock market ended with a slight gain, thanks in part to a continued rally in Shopify shares to record highs.
The S&P energy index in the U.S. tumbled 3.7% after the front-month May U.S. West Texas Intermediate (WTI) contract turned negative - unprecedented in history - with sellers offering buyers $37.63 a barrel. The TSX Energy Capped Index closed down 1.5 per cent.
With much of the global economy suspended due to the coronavirus, physical demand for crude has dried up, creating a global supply glut as billions of people stay home.
“What the energy market is telling you is that demand isn’t coming back anytime soon, and there’s a supply glut,” said Kevin Flanagan, head of fixed income strategy at WisdomTree Asset Management in New York. “This price decline can be good if it means more people going to the pump, but that requires people getting out.”
Year to date, the energy index has lost 45%, by far the worst performer among 11 sectors.
Weathering the broad market sell-off, Amazon rose 0.8% and Netflix jumped 3.4%. Both of those companies have benefited from additional demand as millions of people stay home due to the coronavirus. Netflix reports its quarterly results on Tuesday after the bell.
Helped by a $2 trillion U.S. government package to stimulate the economy, and by bets that the virus was nearing a peak in the United States, the S&P 500 has climbed over 25% from its March low.
The benchmark index remains almost 17% below its February record high, and analysts have warned of a deep economic slump from the halt in business activity and millions of layoffs.
U.S. jobless claims touched 22 million in the four weeks to April 11, and analysts have forecast as many as 5 million more in the latest week. A reading of an April U.S. manufacturing survey, also due on Thursday, is expected to slide to recession-era levels.
The Dow Jones Industrial Average dropped 2.44% to end at 23,650.44 points, while the S&P 500 lost 1.79% to 2,823.16.
The Nasdaq Composite dropped 1.03% to 8,560.73.
Canada’s S&P/TSX Composite Index closed up 28.40 points, or 0.2 per cent, at 14,388.28. Activity was mixed, with banks down slightly and materials higher.
During the session, Shopify became Canada’s second-largest stock by market cap, surpassing TD Bank. Shopify closed up 6.7 per cent at $887.56.
Reuters and Globe staff
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