Oil Monday

This is a very dramatic day on Wall Street. Let me explain what’s happening.

For the last few years, Russia has cooperated with OPEC in keeping oil prices up. The cartel wanted to have more cuts. Russia balked and said no and walked out of last week’s meeting. In their mind, it only serves to help American shale companies.

The Saudis responded by opening the floodgates of production. Combined with weaker demand due to the coronavirus, the price for oil plunged. At one point, oil was down over 30%.

The stock market opened much lower. After five minutes of trading, the S&P 500 was down by 7%. That triggered a circuit breaker where the exchange was shut down for 15 minutes. Hopefully, that should cool things off. The market has since reopened and we’re sitting on big losses.

Some energy stocks are down 20% or 30% today. If I were CEO of an energy stock, I would halt all new drilling, cut my dividend and hold off on new capex. I think we’ll see some layoffs in that sector very soon.

One more thing: today is the eleventh anniversary of the bear market low in 2009.

Posted by on March 9th, 2020 at 11:07 am


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