United Airlines announces stock offering, shares slip

(Reuters) – United Airlines Holdings Inc (UAL.O) on Tuesday announced a stock offering of 39.25 million shares, sending its shares down 3% in extended trading.

The company intends to use the proceeds from the offering towards general corporate purposes, it said.

The underwriters to the offering, Morgan Stanley and Barclays, have access to an additional 3.93 million shares.

The company’s shares closed at $27.88 on Tuesday.

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Wall Street tumbles as oil crash stirs pandemic fears

(Reuters) – Wall Street tumbled for a second straight day on Tuesday as a collapse in U.S. oil prices and glum forecasts by companies worsened fears of a deep economic downturn.

All 11 S&P 500 sector indexes fell 1.6% or more, with energy .SPNY sliding for the seventh time in eight sessions a day after the WTI contract CLc1 crashed below zero as oil traders ran out of storage for May deliveries.

With the collapse spilling into June futures contracts, equity investors became wary of the extent of the economic damage from sweeping lockdown measures that have halted business activity and sparked millions of layoffs. [O/R]

The S&P information technology index .SPLRCT slumped 4.1%, while the financial index .SPSY dropped 3.2%. After many companies pulled their forecasts because of uncertainty related to the coronavirus, investors will focus in the coming days on first-quarter reports for signs of how badly the pandemic is hurting U.S. corporations.

The benchmark S&P 500 index .SPX has climbed over 20% from its March low, powered by trillions of dollars in stimulus, but it remain nearly 20% below its February record high due to fears of devastating economic damage caused by the coronavirus.

“What you’re seeing is pulling back in the areas that have done well, and taking profits while you can,” said Quincy Krosby, a market strategist at Prudential Financial in Newark, New Jersey. “The question will be whether this is a consolidation after the market ran up so quickly, or is this the beginning of a more important pullback in the overall market?”

U.S. jobless claims hit 22 million in the past month as companies launched dramatic cost-saving measures to ride out the slump, and readings of U.S. business activity surveys, due on Thursday, are likely to plummet to recession-era lows.

Coca-Cola Co (KO.N) provided the latest evidence of the damage wrought by the global health crisis, saying its current-quarter results would take a severe hit from low demand for its soft drinks. Its stock fell 2.5%.

International Business Machines Corp (IBM.N) declined 3% after the company withdrew its 2020 annual forecast late on Monday.

In extended trade, Netflix (NFLX.O) surged 2.6% after the streaming video company reported more paid subscribers than expected in the first quarter.

Also after the bell, Texas Instruments (TXN.O) rose 3% following its quarterly report.

During Tuesday’s session, the Dow Jones Industrial Average .DJI fell 2.67% to end at 23,018.88 points, while the S&P 500 .SPX lost 3.07% to 2,736.57.

The Nasdaq Composite .IXIC dropped 3.48% to 8,263.23.

Declining issues outnumbered advancing ones on the NYSE by a 4.27-to-1 ratio; on Nasdaq, a 3.18-to-1 ratio favored decliners.

The S&P 500 posted one new 52-week high and no new lows; the Nasdaq Composite recorded 25 new highs and 34 new lows.

Volume on U.S. exchanges was 12.1 billion shares, compared with a 13.2 billion-share average for the full session over the last 20 trading days.

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GM folds Maven car-sharing unit, citing coronavirus

(Reuters) – General Motors Co (GM.N) said on Tuesday it is shutting down its Maven car-sharing unit, after suspending operations because of the novel coronavirus.

The automaker said it would transfer Maven assets and resources to its Global Innovation group.

Maven had never gained much traction since it was introduced in Ann Arbor, Michigan, in January 2016. Launched when Dan Ammann was GM’s president, Maven had a short-lived strategic alliance with ride services startup Lyft (LYFT.O).

Ammann is now chief executive officer of Cruise, the San Francisco self-driving startup that GM acquired under Ammann’s aegis in early 2016 just after launching Maven.

Julia Steyn, the first head of Maven, left GM in 2019. She is chief executive officer of Bolt Mobility, an e-scooter rental startup co-founded by world-class sprinter Usain Bolt.

In a brief statement on Monday, Pamela Fletcher, head of GM Global Innovation, said the automaker “gained extremely valuable insights” from Maven that would “benefit and accelerate the growth of other areas” of GM’s business.

GM suspended Maven services in March as the coronavirus triggered increasingly stringent government restrictions on mobility, and ultimately elected to shutter the business.

A GM spokesperson said Maven assets would be transferred to other GM units “where there is greater potential for profit and growth.”

Other automakers have fared no better than GM in the still-struggling car-sharing sector.

In December, BMW AG (BMWG.DE) and Daimler AG (DAIGn.DE) said they were exiting the North American car-sharing market. SHARE NOW and its Car2Go unit, a joint venture of the two German automakers, ended operations on Feb. 29 in the United States and Canada, citing high operating costs and the “volatile state of the global mobility landscape.”

The service allowed consumers to rent vehicles by the minute and park them on city streets or at parking meters without charge. It faced tough competition from ride-service companies such as Lyft and Uber Technologies Co (UBER.N), as well as electric scooters.

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Chipotle to pay $25 million related to food borne illness outbreaks: Justice Department

WASHINGTON (Reuters) – Chipotle Mexican Grill (CMG.N) has agreed to pay $25 million and enter a deferred prosecution agreement to resolve charges related to food borne illness outbreaks that sickened hundreds of people between 2015 and 2018, the Justice Department said on Tuesday.

Chipotle, which said the investigation’s factual findings were true, agreed to develop and follow an improved, comprehensive food safety compliance program, the Justice Department said. It will also review food safety audits, restaurant staffing, and employee training to mitigate issues that led to the outbreaks, the department said.

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U.S. could see biggest ever second-quarter GDP decline: White House adviser Hassett

WASHINGTON (Reuters) – White House economic adviser Kevin Hassett said on Tuesday the current dip of negative oil prices is due to a “very short-run thing” – the coronavirus pandemic – and that a decline in second quarter gross domestic could be the biggest ever posted.

“It’s a grave economic situation for sure, that we’re looking at one of the biggest shocks that any major economy has ever experienced and a decline in GDP in the second quarter that could end up being the biggest we’ve ever posted because so many things have shut down,” Hassett said in an interview with Fox News.

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Oil crash slams stocks, dollar gains as risk sentiment rolls over

LONDON (Reuters) – Global stocks fell on Tuesday, a day after U.S. crude oil prices turned negative for the first time ever, as dismal corporate earnings underlined worries about economic damage from the coronavirus pandemic.

The dollar rose against a basket of other currencies as investors shunned riskier assets.

MSCI’s All Country World Index, which tracks stocks across 49 countries, was down 0.9%. European stock markets followed their Asian counterparts lower, with the pan-European STOXX 600 index down over 2% by midday in London.

Monday’s plunge in oil, which saw some prices reach minus $40 a barrel, resulted from growing crude stockpiles and dwindling storage space as lockdowns to contain the spread of the novel coronavirus slashed global fuel use. First-month West Texas Intermediate continued to trade in negative territory on Tuesday, at -$7.13 a barrel.

Graphic – Crude oil’s historic crash below zero: here

“I have always thought of oil a little bit like a currency; it stores value, is controlled by world leaders and makes the world go round,” said Gregory Perdon, Co-Chief Investment Officer at Arbuthnot Latham.

“But yesterday was a wake-up call and investors would be remiss to ignore that low oil means lower inflation, higher defaults, lower growth and more political instability as less petrodollars circulate in the system.”

Signs the pandemic is taking a toll on the global economy continued to roll in.

Australia’s central bank now forecasts the country’s economy will shrink 10% in the first half of 2020. South Korea is set for its biggest first-quarter contraction since 2008, with the latest data showing exports plunged by almost a third in the first 20 days of April.

There was a glimmer of hope in Europe: the mood among German investors improved in April as concern about the impact of the coronavirus pandemic on Europe’s largest economy seemed to ease, a survey from the ZEW research institute showed.

The euro edged lower against the dollar, and Southern European bond yields traded near recent highs before a European Union summit later this week on how the EU will try to revive an economy hit by the pandemic.

AWASH IN OIL

Monday’s plunge in U.S. crude came as the May contract expiry looms at the end of Tuesday’s trade.

International benchmark Brent crude, more readily seaborne than its U.S. counterpart, fell 15.7% to $21.69 per barrel.

That is still some 60% below January’s peak, highlighting the disruption to energy consumption and the long road back to global growth that underpins oil demand.

“This level of oil price is not sustainable for any global oil producer. Even for Saudi Arabia, which has a low cost of production, this is not viable,” said Jai Malhi, global market strategist at J.P. Morgan Asset Management.

“Such low prices will not last and the pressure on storage will likely force OPEC+ into further production cuts in order to boost prices.”

The yield on benchmark 10-year U.S. Treasuries, which falls when prices rise, dropped under 0.6% to 0.5769%..

Spot gold prices traded 1.5% lower at $1,667.36 per ounce.

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Futures slide as U.S. crude crashes below zero

(Reuters) – U.S. stock index futures resumed their slide on Tuesday as gloomy quarterly earnings reports and a historic plunge in U.S. crude prices to below zero raised the specter of a deep global recession in the coming months.

Wall Street fell on Monday as WTI crude CLc1 crashed to minus $40 for the first time in history as sweeping restrictions to contain the coronavirus hits oil demand. With nowhere to store the excess capacity, traders fled from contracts that would deliver barrels of oil to them in May.

Exxon Mobil Corp (XOM.N) shed 3.7% in premarket trading and Chevron Corp (CVX.N) slipped 4.0% as the front month May WTI CLc1 contracts continued to trade below $0 on Tuesday. June contracts also fell by $4, signalling more weakness in demand in the face of a near halt in global activity. [O/R]

Other oil-related companies including Apache Corp (APA.N), Halliburton Co (HAL.N), ConocoPhillips (COP.N), Schlumberger (SLB.N) and Occidental Petroleum Corp (OXY.N) tumbled between 6.3% and 11%.

Coca-Cola Co (KO.N) provided the latest evidence of the damage wrought by the pandemic, saying its current-quarter results would take a severe hit from low demand for sodas.

Investors will also keep a close eye on first-quarter earnings from major U.S. companies including Texas Instruments (TXN.O) and Travelers Companies (TRV.N) later in the day.

At 06:29 a.m. EDT, Dow e-minis 1YMcv1 were down 430 points, or 1.83%, S&P 500 e-minis EScv1 were down 39.25 points, or 1.41% and Nasdaq 100 e-minis NQcv1 were down 71.25 points, or 0.82%. SPDR S&P 500 ETFs (SPY.P) were down 1.59%.

The S&P 500 index .SPX closed down 1.79% at 2,823.16​ on Monday.

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Crude costs money again after shock crash, stocks stay in doldrums

SINGAPORE (Reuters) – U.S. crude oil bounced back into positive territory on Tuesday, but a historic plunge below zero rattled investors and triggered the steepest drop in Asian stock markets in a month.

Traders could not give away West Texas Intermediate overnight after a storage squeeze turned holders of the contracts expiring later on Tuesday to forced sellers.

A $39 rise leaves the price for May delivery at $1.38 per barrel and investors unnerved about further dislocation.

MSCI’s broadest index of Asia-Pacific shares outside Japan lost 2%, as did the Nikkei, EuroSTOXX 50 futures and FTSE futures. E-mini futures for the S&P 500 fell 0.5%, while bonds and the dollar rose.

“The (oil) price action was scary,” said Kyle Rodda, market analyst at IG Markets in Melbourne. “It points to the fact that supply and demand has been destroyed.”

The collapse also came together with more signs of a slow and difficult recovery from the COVID-19 pandemic.

The World Health Organization warned that any lifting of lockdowns to contain the spread of the novel coronavirus must be gradual, and if restrictions were to be relaxed too soon, there would be a resurgence of infections.

Hong Kong’s government said it will extend restrictions aimed at tackling the coronavirus for another two weeks.

German Chancellor Angela Merkel cautioned shoppers rushing to just-reopened stores that lockdown measures could be tightened again if fresh cases arise.

And in the United States, a return to work is looking increasingly chaotic, as some states relax lockdowns while others urging caution faced demonstrators demanding an end to restrictions.

“There is little room for complacency,” DBS strategists Philip Wee and Eugene Leow said in a note.

“Weak oil prices and China’s negative growth are reminders that the coronavirus has hurt demand.”

Stock markets in Sydney, Hong Kong and Shanghai fell around 2%.

South Korea’s KOSPI and won dived after CNN reported that North Korean leader Kim Jong Un was gravely ill, but recovered somewhat after South Korean government sources said the story was untrue.

(GRAPHIC: U.S. crude oil’s historic crash below zero – here)

AWASH IN OIL

Monday’s plunge in U.S. crude came as the May contract expiry looms at the end of Tuesday trade.

Stabilization just above zero and June prices at $21 per barrel point to some relief.

International benchmark Brent crude, more readily seaborne than its U.S. counterpart, held around $25.38 per barrel. That is still some 60% under January’s peak, highlighting the disruption to energy consumption and the long road back to solid global growth that underpins oil demand.

“Even as, or if, virus containment measures ease in the coming weeks, the world is going to be awash in oil for some time,” said Kerry Craig, global market strategist at J.P. Morgan Asset Management. “Economies may be slow to get back up and running to a pace that would warrant a strong increase in demand.”

That had bond markets priced for caution and the safe-haven dollar in the ascendancy. The dollar rose against the euro, yen, pound and Antipodean currencies.

It last stood at $0.6300 per Aussie and at a one-and-a-half week high of $1.2400 per pound.

The yield on benchmark 10-year U.S. Treasuries, which falls when prices rise, dropped under 0.6% to 0.5988% in afternoon trade.

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Negative $40 oil reflects panic – and U.S. crude market economic reality

(Reuters) – Traders desperate to avoid owning oil fled the markets on Monday, sending crude futures into negative territory for the first time ever, in recognition that the coronavirus pandemic has sapped demand for fuel and there is not enough storage for the massive glut of oil present on U.S. soil.

Investors sold the May futures contract due to expire on Tuesday in a series of waves. At one point the contract hit negative $40. When the trading stopped, crude oil had ended the day at a negative $37.63 a barrel, a decline of some 305%, or $55.90 a barrel.

For as sudden as the day’s declines were, it was weeks in the making. The coronavirus pandemic cut fuel demand worldwide by roughly 30% beginning in early March, but for several weeks, the supply of oil worldwide has continued to build. Even the recent deal by OPEC and other major oil-producing countries to reduce supply will not be fast enough, nor large enough, to drain the millions of barrels of unneeded crude present in the markets.

That unwanted oil is instead going into storage, but in the United States, storage is filling much more quickly than anticipated. Cushing, Oklahoma, the tiny town of less than 10,000 people that serves as the main U.S. storage hub, was 70% full as of last week, and traders say it will be full within two weeks.

That realization sparked Monday’s sell-off in U.S. futures markets because of the technicalities of the West Texas Intermediate futures contract, which expires on Tuesday. When oil contracts expire, the holder has to take possession of 1,000 barrels of oil for every contract they own, delivered to Cushing.

However, with Cushing filling up, that leaves traders with the unappetizing option of taking oil they do not want, or getting out of those positions. The mad rush for the door means there were few buyers, and the contract dropped from a normal price of $18 on Friday into unprecedented negative territory.

“We saw a total collapse in the market. There was everybody selling it into the hole with no buyers,” said Phil Flynn, senior market analyst at Price Futures Group. “They’re going to have to drive down to a price where someone wants to buy it, and no one wants to buy it.”

For the first few hours of trading on Monday, the May oil futures steadily edged lower, widening the gap between that contract and the June contract, which, while weak, still ended the day at more than $20 a barrel. But with expiration on the way on Tuesday, the selling accelerated in the last two hours, with oil finally hitting negative territory roughly 20 minutes before the close of trading.

(GRAPHIC: Oil contract gap – here)

Once that level was breached, sellers piled in, sending the contract at one point below negative $40 a barrel before a slight rebound ended what will go down as the worst day since the West Texas Intermediate CLc1 contract was introduced in 1983.

“I’m 55 years old, and I worked on the trading floor in college. I’ve been through the first Gulf War, second Gulf War, World Trade Center, dot-com crisis, and nothing came close to this,” said Bob Yawger, director of energy futures at Mizuho in New York. “It could get worse. This situation that we’re in is that bad.”

COULD GET WORSE

Analysts say this type of market dislocations could recur in coming months because fuel supply will outweigh fuel demand for the foreseeable future. Worldwide oil consumption is roughly 100 million barrels a day, but consumption fell by 30% globally, or about 30 million bpd, beginning in early March.

However, it took the Organization of the Petroleum Exporting Countries, Russia and other countries until early April to agree to cut supply by 9.7 million bpd. Other nations, like the United States and Canada, did not mandate cuts from private industry, but those companies are swiftly reducing output.

“Activity is in free-fall in North America and is slowing down internationally,” said Halliburton Co (HAL.N) CEO Jeff Miller, on a company earnings call Monday.

It will nonetheless take months before those cuts fall enough to come in-line with reduced demand – even if world economies rebound somewhat as people recover from the pandemic, which has killed more than 165,000 people worldwide. With storage soon to be completely full in the United States, crude will not have a place to go.

Crude stockpiles at Cushing rose 9% in the week to April 17 to around 61 million barrels, market analysts said, citing a Monday report from Genscape. The hub has capacity for roughly 76 million barrels.

“It’s clear that Cushing is going to fill and it will stay full for the next several months,” said Andy Lipow of Lipow Oil Associates.

Unless production is cut more swiftly, next month could see a repeat of Monday’s frenzied activity with the June contract, which settled at $20.43, or $58 more than the impaired May contract.

“We’re probably unfortunately going to see this dislocation in these energy contracts remain in place for next month as well,” said Edward Moya, market analyst at OANDA. “You’re going to see this remain in place until we really start to see the oil giants, the Exxons, the Chevrons, just be forced to stop production.”

(GRAPHIC: U.S. oil futures contracts show gigantic gap – here)

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Oil price crashes into negative territory for the first time in history amid pandemic

NEW YORK (Reuters) – U.S. crude oil futures collapsed below $0 on Monday for the first time in history, amid a coronavirus-induced supply glut, ending the day at a stunning minus $37.63 a barrel as desperate traders paid to get rid of oil.

Brent crude, the international benchmark, also slumped, but that contract was nowhere near as weak because more storage is available worldwide.

While U.S. oil prices are trading in negative territory for the first time ever, it is unclear whether that will trickle down to consumers, who typically see lower oil prices translate into cheaper gasoline at the pump.

As billions of people around the globe stay home to slow the spread of the novel coronavirus, physical demand for crude has dried up, creating a global supply glut.

Traders fled from the expiring May U.S. oil futures contract in a frenzy on Monday with no place to put the crude, but the June WTI contract settled at a much higher level of $20.43 a barrel.

“Normally this would be stimulative to the economy around the world,” said John Kilduff, partner at hedge fund Again Capital LLC in New York. “It normally would be good for an extra 2% on the GDP. You’re not seeing the savings because no one is spending on the fuels.”

The May U.S. WTI contract fell $55.90, or 306%, to settle at a discount of $37.63 a barrel after touching an all-time low of -$40.32 a barrel. Brent was down $2.51, or 9%, to settle at $25.57 a barrel.

“It’s like trying to explain something that is unprecedented and seemingly unreal,” said Louise Dickson, oil markets analyst at Rystad Energy. “Pricey shut-ins or even bankruptcies could now be cheaper for some operators, instead of paying tens of dollars to get rid of what they produce.”

Refiners are processing much less crude than normal, so hundreds of millions of barrels have gushed into storage facilities worldwide. Traders have hired vessels just to anchor them and fill them with the excess oil. A record 160 million barrels is sitting in tankers around the world.

Related Coverage

  • Instant View: Spot U.S. oil futures crash below zero with nowhere to store crude

U.S. crude stockpiles at Cushing rose 9% in the week to April 17, totaling around 61 million barrels, market analysts said, citing a Monday report from Genscape.

The spread between May and June at one point widened to $60.76, the widest in history for the two nearest monthly contracts.

Investors bailed out of the May contract ahead of expiry later on Monday because of lack of demand for the actual oil. When a futures contract expires, traders must decide whether to take delivery of the oil or roll their positions into another futures contract for a later month.

Usually this process is relatively uncomplicated, but this time there are very few counterparties that will buy from investors and take delivery of the oil. Storage is filling quickly at Cushing in Oklahoma, which is where the crude is delivered. [EIA/S]

“The storage is too full for speculators to buy this contract, and the refiners are running at low levels because we haven’t lifted stay-at-home orders in most states,” said Phil Flynn, an analyst at Price Futures Group in Chicago. “There’s not a lot of hope that things are going to change in 24 hours.”

Prices have been pressured for weeks with the coronavirus outbreak hammering demand while Saudi Arabia and Russia fought a price war and pumped more. The two sides agreed more than a week ago to cut supply by 9.7 million barrels per day (bpd), but that will not quickly reduce the global glut.

Saudi Arabia is considering applying oil cuts as soon as possible, rather than starting from May, a Wall Street Journal reporter said on Twitter, citing sources.

Brent oil prices have collapsed around 60% since the start of the year, while U.S. crude futures have fallen around 130% to levels well below break-even costs necessary for many shale drillers. This has led to drilling halts and drastic spending cuts.

MORE DATA SPARKS GLOBAL ECONOMIC CONCERNS

Weak global economic data also pressured prices. The German economy is in severe recession and recovery is unlikely to be quick as coronavirus-related restrictions could stay in place for an extended period, the Bundesbank said.

Japanese exports declined the most in nearly four years in March as U.S.-bound shipments, including cars, fell at their fastest rate since 2011.

U.S. oilfield services giant Halliburton Co on Monday reported a $1 billion first-quarter loss on charges and outlined the largest budget cut yet among top energy companies.

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