US stocks fell in early trading Monday with investors surveying the economic damage done by the coronavirus pandemic and seeing gloomy prospects for a sustained rebound as oil prices, a proxy for future activity, fell.
West Texas Intermediate crude oil futures, the guide for US prices, fell to $12.43 a barrel Monday, a decline of more than 31 percent from the hit and the lowest level since March 1999. The price of Brent crude, the worldwide benchmark, was $26.63 a barrel, down about 5 percent in early trading.
The oil price decline comes as consumption drops during the coronavirus pandemic and oil in storage to be refined rises.
The market had posted back-to-back weekly gains for the first time in about two months prior to Monday's skid.
The Volatility Index, known as VIX, created Chicago Board of Options Exchange rose about 10.5 percent from its previous close. The forward-looking "fear index" gauges the market's expectation of volatility in the next 30 days. It's derived from S&P 500 options.
In early trading Monday, the Dow Jones Industrial Average fell 346.08 points, or 1.45 percent, to 23,8846.92. The S&P 500 lost 1.11 percent. The Nasdaq Composite slipped 0.64 percent.
On Friday, the Dow closed up 704.81 points. S&P gained 75.01 points. The Nasdaq Composite climbed 117.78 points.
The S&P 500, a broader index than the 30-stock Dow, dropped 34 percent between February 19 and March 23 as the economy shut down amid the coronavirus pandemic. It has regained about 28 percent, but some investors question the strength of the rally and have shorted cruise lines, hotels, resort and technology stocks.
Despite recent gains, short-sellers believe some sectors of the market will fall, The Wall Street Journal reported.
A short seller bets the price of a stock will decline. The short-seller borrows shares for a specified period and sells them to others willing to pay the current price. If the shares fall, the short-seller buys them back at the lower price and returns them to the owner, typically a broker, and pockets the profit. But if the shares rise, the short-seller takes a loss.
Some hotels have closed during the outbreak and the US Centers for Disease Control and Prevention has prohibited cruises into July, making the sectors subject to short selling.
Demand for air travel has collapsed as the coronavirus, also called COVID-19, spread. On Monday, United Airlines said it lost $2.1 billion in the first quarter. In early trading, the company's stock lost $1.38 a share, or 4.75 percent, and changed hands at $27.70 a share. The 52-week range is $17.80 - $96.03 a share
But some companies, including Walmart, Campbell Soup and Kroger, have performed solidly as people shelter in place.
Short-sellers are likely to be aggressive as long as the market remains volatile and produces manic swings between positive and negative territory.
Coca-Cola, Delta Air Lines and Netflix will report earnings this week, giving investors further insight into what the coronavirus has done to the economy.
