Mohamed El-Erian, chief economic advisor at Allianz, joins “Squawk Box” to discuss why he believes the U.S. economy could contract as much as 14% this year due to the coronavirus crisis.
Stocks fell to start the week on Monday as investors weighed the latest coronavirus news along with a decline in U.S. crude prices. The market was coming off its first back-to-back weekly gains in more than two months.
The Dow Jones Industrial Average traded 188 points lower, or 0.8%. The S&P 500 slid 0.4%. (Click here for the latest market news.) Chevron and Exxon Mobil fell more than 1% each pressure the Dow. Real estate and utilities led the S&P 500 lower.
However, the Nasdaq Composite erased an earlier decline to trade 0.2% higher as stocks benefiting from people staying home rose broadly. Amazon and Netflix rose 2.2% and 4.8%, respectively, while Roku climbed more than 6%.
A fall in energy prices raised concerns about how deep the economic slowdown will be this quarter. The May contract for West Texas Intermediate, which expires on Tuesday, plunged more than 44% to $10.10 per barrel on weak demand outlook and storage capacity issues.
The negative impact on stocks from oil likely would have been worse were it not for lesser declines in oil contracts expiring during future months. WTI’s June contract slid over 9% to $22.75 per barrel. July’s oil contract was down 5%. It was a strange phenomenon that analysts chalked up to the collapse in demand for oil contracts expiring this week. Refineries don’t need the oil and are near storage capacity with most of the country shut down.
“The moves in the oil market are really just unbelievable now that we are literally running out of storage space,” Peter Boockvar, chief investment officer at Bleakley Advisory Group, said in a note. “I do believe that these types of moves is what bottoms are made of and in May and June when things start to reopen again it will go a long way in helping along with the production cuts.”
Stocks got a jolt last week after a report said patients with severe virus symptoms were quickly recovering after using remdesivir, a Gilead Sciences drug. The Dow, S&P 500 and Nasdaq all rose more than 2% last week. The major averages also had their first consecutive weekly gain since February.
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