Market YTD Apr 13.2020

April 13, 2020 Read in Browser TOGETHER WITH Good morning. Quick calendar check: April 13. That means we at Morning Brew (and many of you) have been working from home for exactly one month. If you’d never thought you’d make it this far...well, you’ve made it this far.

MARKETS YTD PERFORMANCE NASDAQ 8,153.58 - 9.13% S&P 2,789.82 - 13.65% DJIA 23,719.37 - 16.89% GOLD 1,741.00 + 14.54% 10-YR 0.729% - 119.10 bps OIL 23.11 - 62.24% *As of market close COVID-19 update: The U.S. surpassed Italy as the country with the most recorded coronavirus deaths in the world. On CNN yesterday, Dr. Anthony Fauci said he thinks stay-at-home orders could be relaxed in some parts of the country “maybe next month.” New hospitalizations in New York hit their lowest level since the pandemic began.  U.S. markets: Despite the public health and economic crisis, the stock market is coming off one of its best weeks in decades. The S&P is up almost 25% since a March 23 low. ENERGY Unlike You, Oil Production Gets a Much-Needed Haircut Yegor Aleyev\TASS via Getty Images In what was likely the most consequential videochat in history, Saudi Arabia, Russia, and other oil producers agreed yesterday to cut output of crude oil. Reflecting the theme of the year, these cuts are “unprecedented.” They’ll remove 9.7 million barrels of oil a day from markets—equivalent to about 10% of the global supply. If producers failed to make a deal, prices were expected to plunge when trading opened.  How it went down Saudi Arabia and Russia reached an outline for a supply cut on Thursday. This marked major progress—the two countries had been duking it out in a price war since the beginning of March, when emergency talks to slash production fell apart. We managed to make it this far before mentioning the coronavirus, which of course is a leading character in this drama. The pandemic canceled all of your spring/summer travel plans, which means demand for fuel evaporated.  That + no agreement on supply cuts sent oil prices down 40% since early March, jeopardizing the countries and firms that rely on crude to trade above certain prices. OPEC’s secretary-general called the supply/demand fundamentals “horrifying.”  Last-minute snag While Russia and the Saudis buried their feud by Thursday, one country was still holding out: Mexico, which thought the production cuts being asked of it were unfair. Following several phone calls with world leaders, President Trump said the U.S. would "pick up some of the slack” for Mexico—a win for president Andrés Manuel López Obrador. Trump, an OPEC critic, played a surprisingly active role during negotiations. Perhaps that reflects the existential threat low oil prices present to the booming U.S. shale industry.  Looking ahead...the question everyone’s asking is, “Are these cuts steep enough to stabilize prices?” The answer you’re most likely to hear is “no.” Goldman Sachs and UBS said not even a 15% output cut would put supply in line with demand.