Stocks fall as oil prices plunge despite coronavirus optimism

US stocks sank Monday as plummeting oil prices mitigated Wall Street’s optimism about the coronavirus crisis.

The Dow Jones industrial average tumbled as much as 507.39 points, or about 2.1 percent, at the open after posting gains for two consecutive weeks. The S&P 500 fell as much as 1.5 percent in early trading while the Nasdaq Composite dropped as much as roughly 1 percent.

The selloff came as the May futures contract for West Texas Intermediate crude oil — which expires Tuesday — plunged about 40 percent to $10.77 a barrel, a level not seen since the late 1990s. Investors have been concerned about oil producers churning out more fuel than the world can store even as the coronavirus pandemic has destroyed demand for travel.

“At a minimum, oil prices will be the last asset class to recover from lockdown,” said Stephen Innes, chief global market strategist at AxiCorp. “End transport demand will only occur in the final stages of reopening when border crossing is allowed, and travel restrictions get lifted.”

Monday’s drop in stocks followed strong gains in the past two weeks as investors embraced signs that the worst of the virus crisis has passed. More such signals emerged over the weekend as New York Gov. Andrew Cuomo said the state was “past the high point” of the outbreak. Some stores were also slated to start reopening Monday in Germany as the country started to loosen restrictions.

All three Wall Street indexes rose more than 2 percent last week, thanks in part to report that a drug made by Gilead Sciences was helping coronavirus patients recover quickly. President Trump also unveiled guidelines last week for states to reopen their economies after imposing restrictions to stem the spread of the virus.

“We’ve seen a strong rebound in equity markets prior to last week so it wasn’t really surprising to see some profit taking,” Craig Erlam, senior currency analyst at OANDA, said in a commentary.  “It’s now a question of how keen investors will be to jump back in.”

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