Stocks retreated in early trading on Tuesday as crude prices continued to plunge amid worries about storage of the key commodity, while companies continued to pull full-year guidance as the COVID-19 pandemic weighed on results.
The May contract for West Texas Intermediate fell into negative territory on Monday but turned slightly positive Tuesday, while June futures dropped more than $5 a barrel to $14.92 each, according to recent data from the CME Group. The outbreak of the respiratory disease has crippled demand for oil around the world, raising concerns about oversupply.
“Though negative pricing is unlikely to continue, cratered crude values should persist this month with volatility, and the economic outlook for oil-producing regions in North America is dire,” said Marc Desormeaux, senior economist at Scotiabank.
Energy shares dropped 3.3% on the Standard & Poor’s 500, with oil producers battered by the price shock. ConocoPhillips (COP) lost 3.6%, Occidental Petroleum (OXY) was down 3.4% and Noble Energy (NBL) was 3.9% lower.
Also on the S&P 500, financials fell 2.4% and communication services was 2.2% weaker as all 11 of the sectors pulled back. The blue chips on the Dow Jones Industrial Average were broadly weaker, with IBM (IBM) off by 4.8% after reporting late Monday first-quarter results that fell year-on-year while scrapping guidance for the full year.
As earnings season carried on, companies continued to offer warnings about the impact of the pandemic, and ongoing government orders to keep people at home and limit the spread of the disease. As of Tuesday, almost 2.5 million people have been infected around the world, with nearly 172,000 deaths, according to Johns Hopkins University data.
Tobacco company Philip Morris International (PM) fell 2.4% after pulling its earnings forecast for the year and projection second-quarter results lower than the Wall Street view. Coca-Cola (KO) was down 0.9% after it said the effects of changing consumer purchase patterns will have a “significant impact” on results in the current quarter.
In other company news, LabCorp (LH) gained 2.6% after receiving an Emergency Use Authorization from the US Food and Drug Administration for a COVID-19 home test kit. ONEOK (OKE) fell 4.4% after Goldman Sachs downgraded the stock to neutral from buy.
In morning trading, the Dow, S&P 500 and the Nasdaq Composite were all 1.6% weaker.