Crude oil prices crashed 36% on Monday. West Texas Intermediate Crude is trading at below $12.
Oil is now trading at the lowest levels since 1986. And today’s drop occurred even though major oil producers agreed to cut production by 10 million barrels per day.
The outbreak is causing a huge decline in oil demand.
The International Energy Agency says global oil demand will drop by 29 million barrels per day. That’s a 29% drop in daily demand for crude.
The weak price action for oil reveals the collapse of the global economy. Oil demand has plunged as economic activity grinds to a halt. Airlines aren’t flying. People aren’t driving. And less global trade means less demand for oil.
This week I’m also closely monitoring corporate America. Big companies are starting to report quarterly earnings. And we’ll see a number of major reports released this week.
This increased volatility is creating a huge and profitable trade setup.
The Big News…
Texas and Vermont Ease Restrictions
American states are starting to ease restrictions. These include allowing parks to re-open. And businesses that can maintain social distancing can also open for business.
New $1 Trillion Stimulus
Republicans on Capitol Hill are starting work on another stimulus bill. This one is expected to top $1 trillion and include huge spending on infrastructure projects, including 5G. Go here for the top All American 5G stocks to BUY NOW.
Germany Begins Opening Shops
Germany has implemented aggressive testing for coronavirus. The country began reopening stores for the first time in a month. Stores smaller than 8,600 square feet will be allowed to open. The growth in new infections has slowed in recent days.
Australia and New Zealand Open for Business
The two countries plan to reopen in the coming weeks. New infections are relatively low in recent days. Plans also include opening schools in the coming weeks.
Spain Expects 13.6% GDP Drop
Spain’s central bank just released its outlook for the year. The country expects the economy will shrink 13.6%. Unemployment is expected to surge to 22%. The country’s unemployment rate was at 14% before the outbreak.
The Coronavirus Numbers
Here are the numbers from Friday at 1:30 p.m. ET.
- 2,430,923 Infected worldwide
- 166,278 Deaths
- 767,379 Infected in the U.S.
- 40,750 Deaths in the U.S.
The outbreak will crush U.S. corporations and their earnings. Reports start next week.
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Stocks are trading down 1% this morning.
The plunge in oil prices is clearly weighing on stocks.
Stocks have posted a huge rally in the last three weeks. That rally is based upon the idea that this will be a short downturn . . . and that the economy will quickly bounce back in the third and fourth quarters of the year.
That view appears overly optimistic. Until this health crisis is resolved, many Americans will be hesitant to go back to work or resume their “normal” lives.
Earnings season heats up this week – with 20% of companies in the S&P 500 reporting financial results. This includes airlines and technology companies.
Smart traders won’t try to predict earnings season results.
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Yours in Health & Wealth,