As if the coronavirus wasn’t enough, the Saudis showed their strength by starting an oil price war, which pushed down the price of crude by more than 30% and then crushed equity prices around the world.
U.S. investors woke up to equity futures down 5%, the maximum amount they are allowed to fall, called limit down, with the Dow off 1,303 points and the S&P 500 down 145 points. If those losses hold through the day, or the market drops more, we will be at the lowest point in a year, giving up much of the gains from last year.
The fall in oil and equities is matched by record gains in bond prices, which have driven yields to their lowest levels ever. The 10-year U.S. Treasury bond traded below 0.5%, and the 30-year Treasury fell under 1%. Investors now expect the Fed to cut interest rates by 0.75% when they meet later this month.