US stocks open sharply lower over coronavirus pandemic

US stocks are sharply lower on Wall Street and oil prices are continuing to collapse as traders anticipate demand for energy to shrivel because of the widespread business, factory and travel shutdowns related to the coronavirus pandemic.

The world remains awash in an oversupply of crude just as demand for it is suffering an unprecedented pullback.

Major US stock indexes were down about 2% in early trading Tuesday. The selling was widespread across industries, and 96% of the stocks in the S&P 500 index fell. In another sign investors were feeling nervous, prices for US government bonds rose again, sending yields lower.

The oil market plunged further on Tuesday on concerns over a collapse in demand as the pandemic leaves factories, cars and airplanes idled around the world.

The extreme volatility in energy markets highlights investors’ worries about the duration of the coronavirus outbreak and its impact on the economy. That is in turn weighing on financial markets more broadly, including stocks.

The benchmark US oil contract was down $4.78 at just $15.65 per barrel on Tuesday, having traded as low as $11.79 a barrel at one point.

The drop comes a day after the price of oil fell below zero on Monday, partly due to technical factors as traders shifted from one futures contract to another.

The US oil contract for delivery in May settled at negative $37.63 per barrel on Monday, an indication that investors don’t want to be left holding oil at a time when storage facilities are almost full and demand is at its lowest since the mid-1990s.

The tumult in the oil market reflects uncertainty over where the world economy will head as governments begin to loosen controls imposed to contain the coronavirus.

“We could merely be in the eye of the hurricane as the epicenters of its rage remain centered around demand devastation and crude oil oversupply,” Stephen Innes of AxiCorp. said in a commentary.

“At a minimum, oil prices will be the last asset class to recover from lockdown” and only when travel restrictions are lifted, he said.

Brent crude, the international standard, dropped $45.72 to $19.85.

“The historic drop in WTI prices is an indication of the downward pressure which many other crude oil grades could face, given the oversupply situation,” Sushant Gupta of Wood Mackenzie said in a report.