Dow, S&P 500, Nasdaq sink as oil prices surge past $100 a barrel

The Dow Transports Index (^DJT) is now on track to have fallen 9% over the past three sessions, its biggest three-day decline since falling about 13% after “Emancipation Day” last April.

another After about two weeks of trying, the Dow recently failed to break above 20,000 – forming a classic pennant chart pattern. Now, it’s falling sharply from this wedge, losing about 1,000 points (about 3%) in each of the past three sessions.

The weakness of this energy-sensitive group was evident in both consumer-facing and business-to-business names – from United Airlines (UAL) down more than 6%, to Uber (UBER) down 3.5%, to freight and logistics name XPO (XPO) also down 3.5%.

This remains one of the clearest canaries in the coal mine. Until transportation stabilizes, it will be difficult to prove that the broader growth scare is actually easing.

Within minutes of the oil futures market reopening, futures prices for international benchmark Brent crude (BZ=F) and U.S. benchmark West Texas Intermediate (WTI) crude (CL=F) both jumped to as high as $119 and were trading at the same price point during the evening.

The world’s two main pricing benchmarks have begun trading at par, signaling an unusual market dynamic.

Generally speaking, WTI usually trades about $3 to $7 cheaper than Brent crude oil. The spread reflects differences in logistics and market access.

Brent crude oil is priced based on oil produced in the North Sea and represents the global market for seaborne crude oil – crude that can be easily loaded onto tankers and shipped to major refining hubs in Europe and Asia. Because Brent crude reflects global trade supplies, it typically commands a premium.

In contrast, WTI is priced at a storage center in Cushing, Oklahoma. While the crude oil itself is of high quality, the pricing point is inland and more closely connected to the North American pipeline system. This logistical constraint typically causes WTI to trade slightly below Brent crude prices.

When two benchmarks are priced at the same level, it usually indicates that global supply risks are pushing prices higher across the board and overriding Brent’s normal logistics premium. Buyers who have primarily booked Brent are now looking to WTI for replenishment, while Brent remains unavailable – currently locked in the Persian Gulf behind the Strait of Hormuz, where shipments have dropped to near zero as the Iran conflict rages on.

In other words: When WTI reaches price parity with Brent, it’s a clear sign that global oil markets are under severe stress.

Overnight, WTI crude (CL=F) and Brent crude (BZ=F) briefly surged to within $120 a barrel, levels not seen since Russia invaded Ukraine in mid-2022. They have since fallen back to around $100, but with more than three trading weeks left in March, they are still poised for huge monthly gains.

WTI is up more than 50% this month, a gain not seen since April 2020, when oil rebounded from negative prices. This was also the last time the Oil VIX (^OVX) traded at elevated levels above 100, as calculated by USO options. Unlike the equity VIX (^VIX), which typically rises when stocks fall, commodity volatility measures (including gold) typically rise with underlying prices.

Meanwhile, Brent crude is up more than 40% this month, which would be the biggest monthly gain in data since late 2007.

My first line was $8 and it broke on Friday. The key question now is whether crude oil can sustain above $100, which really changes every strategy around the world.

Shares of Hims & Hers Health (HIMS) soared Monday morning, rising more than 50% in premarket trading following reports that a long-running feud with Novo Nordisk (NVO) has ended and that the drugmaker has agreed to distribute its products through the Hims platform.

Novo Nordisk shares rose 1%.

According to Bloomberg, which broke the news, Sims and Novo Nordisk could announce a formal partnership as early as Monday. The deal reportedly came after Novo Nordisk sued Hims in February, accusing the platform of distributing knockoff versions of its Wegovy weight-loss drug and violating patent protection.

This reportedly marks the second such partnership between the two companies. Novo Nordisk pulled out of the first deal within two months after accusing Himes of refusing to stop distributing generic versions of Novo Nordisk’s drugs.

“One of the big issues with Hims was that we made an agreement that massive compounding would stop, but unfortunately, it didn’t,” Ludovic Helfgott, Novo’s executive vice president of product and portfolio strategy, said in an interview quoted by Bloomberg. “That’s why we ended the partnership.”

Veteran strategist Chris Rupkey offers the following solid new take on the surge in oil prices.

I’d say his views are far from the consensus (we’re in recession because of the Iran situation), but we should be on the lookout for comments like this in the coming days:

Goldman Sachs’ new forecast for oil looks outdated given the sharp swings in oil prices since last night.