Wall Street is looking at an unprecedented bloodbath when it opens Monday as futures for all three indices are plumbing lows rarely seen by the market.
The catalyst for this massive and impending sell-off is the crude oil price war launched Sunday pitting OPEC against Russia and non-OPEC producers. Also set to ignite this carnage is the COVID-19 outbreak in the U.S. now showing clear signs of following the horrific paths being taken by China, South Korea, and Italy.
As 4:45 a.m. ET Monday, futures on the Dow Jones Industrial Average implied a mammoth opening drop of more than 1,300 points. The S&P 500 futures and NASDAQ-100 futures also herald huge losses.
The massive declines in futures confirm there no end in sight for Wall Street's nauseating volatility of the past two weeks that saw the S&P 500 swing rise and fall more than 2.5% for four days straight.
Exceptional volatility hastened the flight to the relative safety of U.S. Treasurys. The yield on the benchmark 10-year Treasury note fell below 0.5% -- a record low -- before seeing a slight recovery. It was last trading at 0.524%.
Gold, always a favorite safe-haven asset, is now worth $1,700 an ounce, its highest price level since December 2012 -- and will likely climb even higher. On the other hand, copper prices sank to a more than three-year low of $2.46. Copper is seen as a barometer of broad economic demand given its applications in electrical equipment and manufacturing.
Analysts agree the catalyst driving this new wave of gloom is the crude oil price war pitting OPEC against Russia. This price war erupted into the open after Russia on Friday rejected oil price cuts meant to stabilize prices in favor of a grab-as-much-market-share-as-you-can approach.
The international benchmark Brent crude futures plummeted 29.07% to $32.11 per barrel after falling 30% earlier. U.S. West Texas Intermediate (WTI) crude futures dropped 30.98% to $28.49 per barrel.
"Crude has become a bigger problem for markets than the coronavirus," said Adam Crisafulli, founder of Vital Knowledge, Sunday. "It will be virtually impossible for the [S&P 500] to sustainably bounce if Brent continues to crater," he added.
The grim scenario forecast for Monday has some analysts looking at Doomsday.
"The idea that lower gasoline prices is going to put more cash in workers' pockets and give consumer spending and the economy a boost doesn't seem to cushion the blow for stock market investors," said Chris Rupkey, MUFG Union Bank's chief financial economist. "They want out. Big time. The sky is falling. Get out, get out while you can. Wall Street's woes have to eventually hit Main Street's economy hard."
