Oil Rises In Volatile Trading As OPEC+ Agrees To Historic Production Cut

Plus, the Fed’s Kashkari said the U.S. could face 18 months of rolling shut downs due to the coronavirus, the WHO said there are currently 70 vaccines in development for the novel virus globally, Amazon said it is hiring another 75,000 workers as demand continues to surge, and Ford warned of a 15.7% drop in first quarter revenue.

Stocks fell to start Monday with the Dow trading 500 points, or 2.1%, lower. The S&P 500 slipped 2%, while the Nasdaq slid 1%.

Oil rose Monday morning after the world’s top producers agreed to cut output by 9.7 million barrels a day beginning on May 1 following a week-long marathon of negotiations. The deal, which was finalized on Sunday, marks the single largest output cut in history. West Texas Intermediate crude traded as high as $24.74 per barrel, while Brent crude rose as high as $33.99 in a volatile session. “Unprecedented measures for unprecedented times,” wrote Ed Morse, Citi’s global head of commodities, in a note to clients on Sunday. “It’s simply too late to prevent a super-large inventory build of over one billion barrels between mid-March and late May and to stop spot prices from falling into single digits.” Following the announcement, Saudi Arabia said it was prepared to cut production further if needed when the OPEC+ alliance meets again in June, the kingdom’s energy minister said. “Flexibility and pragmatism will enable us to continue to do more if we have to,” said Prince Abdulaziz bin Salman to reporters on a conference call on Monday. “We have to watch what’s happening with demand destruction or demand improvement, depending on how things evolve.”

A “long, hard road.” That’s how Minneapolis Fed President Neel Kashkari described the country’s path to economic recovery from the coronavirus pandemic on Sunday. Without an effective therapy or a vaccine for COVID-19, Kashkari said the U.S. economy could face 18 months of rolling shutdowns as the outbreak recedes and flares up again. “We’re looking around the world. As they relax the economic controls, the virus flares back up again,” Kashkari told CBS’s “Face the Nation”. “We could have these waves of flareups, controls, flareups and controls until we actually get a therapy or a vaccine. I think we should all be focusing on an 18-mont strategy for our health care system and our economy.” Meanwhile, Federal Reserve Vice Chairman Richard Clarida told Bloomberg that the central bank has the tools it needs to keep the U.S. out of a deflationary trap, even as the coronavirus delivers a swift blow to the economy. “Demand is impacted very adversely, we’re trying to offset that with our policy,” Clarida said. “I think we have the tools to keep the economy out of deflation and to support the economy through this challenging period. … We’ll use our authority forcefully and aggressively until we’re confident the economy’s recovered. There is nothing fundamentally wrong with the U.S. economy. I came into the year in a very strong position in terms of employment and growth and financial markets and I’m confident we can get back there.”

Cases of the coronavirus in the U.S. rose to more than 557,590 over the weekend. Dr. Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases, on Sunday expressed “cautious optimism” that the coronavirus outbreak is slowing down in the U.S., but added that while parts of the country may be able to begin reopening as soon as May, the whole country won’t turn back on like a “light switch.” Globally, as the death toll from the virus tops 114,000, the World Health Organization said that there are 70 coronavirus vaccines in development worldwide, with three candidates already being tested in human trials. While it usually takes around 10 to 15 years to get a vaccine to market, the drug industry is hoping to compress that time and have a vaccine available within the next year.

Amazon shares are up more than 4% this morning after the online retail giant said it is hiring an additional 75,000 workers at its facilities, on top of the 100,000 new positions it filled last month, as demand continues to surge due to the coronavirus. “We continue to see an increased demand as our teams support their communities, and are going to continue to hire, creating an additional 75,000 jobs to help serve customers during this unprecedented time,” the company said in a release. Amazon said that the hiring spread and a temporary $2-an-hour wage boost will likely cost the company more than $500 million, higher than the prior estimate of $350 million. 

And Ford shares are down -5% after the automaker warned of a 15.7% drop in first-quarter revenue as the coronavirus depresses sales and production. The automaker said this morning that it can’t yet provide an accurate estimate of its earnings, but said that it does expect a pretax loss of about $600 million with Q1 revenue around $34 billion, down from the $40.3 billion it saw in the same period last year. “We continue to opportunistically assess all funding options to further strengthen our balance sheet and increase liquidity to optimize our financial flexibility,” Ford CEO Tim Stone said in a prepared statement. “We also are identifying additional operating actions to enhance our cash position.”

Stocks We’re Watching

NexTech AR Solutions (OTC: NEXCF): NexTech AR shares jumped as much as 25% Friday and are up another 5% today after Starwood Research boosted its price target for the firm to $20 per share – 1,595% higher than the current price. “We believe NEXCF is under-valued based on it’s strong growth fundamentals,” Starwood wrote in a note. “The stock is now even better positioned for a potential upside to $20 as the company’s AR business is perfectly aligned with the new coronavirus theme of remote working/AR-powered ‘try it on’ e-commerce, and training. The new (pending) acquisition of Jolokia – a remote work/learning has the potential to increase NEXCF valuation by an extra $300 million ($5/share), as investors start to understand NEXCF parallels to remote work/learning peer group comp Zoom Inc – which trades at 31x revenues, at recent $132/share.”


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