Wall Street's main indexes dropped 7% and the Dow Jones Industrials crashed 2,000 points in what would be its biggest one-day fall ever, as trading resumed on Monday following a 22% slump in oil prices.
Trading on U.S. stock exchanges was halted immediately after opening on Monday, as the S&P 500 fell 7%, triggering an automatic 15 minute cutout put in place after the 2008-9 financial crisis.
Saudi Arabia's move to raise oil production significantly after OPEC's supply cut agreement with Russia collapsed sent ripples across global financial markets already panicking about the impact of the coronavirus outbreak.
Crude oil logged its worst day in almost three decades, sending oil majors Chevron Corp and Exxon Mobil Corp down more than 9%. The energy index slumped 20.1%.
Stock index futures fell 5% overnight to their daily trading limit as Saudi Arabia stunned markets with plans to raise oil production significantly after OPEC's supply cut agreement with Russia collapsed.
Crude oil logged its worst day in almost three decades, sending oil majors Chevron Corp and Exxon Mobil Corp down about 15%. All 30 components of the blue-chip Dow were in the red in premarket trading.
"It's probably a net negative for the world economy that oil prices have fallen," said Simon MacAdam, global economist at Capital Economics in London.
- Israel Extends Coronavirus Quarantine Orders to All Arrivals, 58 Cases Confirmed
- As Oil Prices Crash, Coronavirus Unleashes Economic Warfare
A dip in oil prices is generally considered positive for global growth, but concerns about the economic damage from the virus outbreak have sparked a worldwide sell-off that has erased about $3.5 trillion from the value of companies listed on the benchmark S&P 500.
"You will now have pain on oil producers and on investment, and you won't have an uptick in consumer spending because they aren't comfortable because of the virus concerns," MacAdam said.
The outbreak has now infected more than 110,000 people globally, triggered a lockdown in northern Italy, crippled supply chains and prompted cuts to global growth forecasts.
The number of confirmed U.S. cases of coronavirus rose to nearly 550 on Sunday.
"Our baseline expectation is of a mild recession and this (the coronavirus and oil price crash) is a reality check, which is allowing investors to reassess the situation," said Bas van Geffen, an analyst at Rabobank in Amsterdam.
Traders are now expecting the U.S. Federal Reserve to cut interest rates next week after an emergency reduction on March 3.
The yield on the benchmark 10-year U.S. Treasury was on course for its biggest one-day fall in almost a decade, sending shares of rate-sensitive U.S. banks including Citigroup Inc, Bank of America Corp and JPMorgan Chase & Co down between 9% and 12%.
Marathon Oil Corp, Devon Energy Corp, Apache Corp, Pioneer Natural Resources Co fell between 25% and 34% and were some of the biggest decliners among the S&P 500 components trading before the bell.
At 8:58 a.m. ET, Dow e-minis were down 1,255 points, or 4.87%. S&P 500 e-minis were down 145 points, or 4.89% and Nasdaq 100 e-minis were down 410 points, or 4.82%.
In news-driven moves, Willis Towers Watson rose 1.2% after UK-based insurance broker Aon Plc said it would buy the company for nearly $30 billion in an all-stock deal. U.S.-listed shares of Aon fell 11%.