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Crude oil price drop sets off U.S. stock market plunge

Hillsborough County

TAMPA (WFLA) – Over the weekend, Greg Ghodsi, a Senior Vice President with Raymond James watched the price of crude oil take it’s steepest dive in nearly 30 years. The price drop comes and Russia and Saudi Arabia battle over the price of oil.

The two oil-producing giants are also stepping up production and Ghodsi and others say it the oil production battle could not come at a worse time.

“At the same time you have Italy that’s basically quarantined a third of the country and when you quarantine parts of society, it generally drops the consumption of oil,” said Ghodsi.

On Monday investors took the crude oil price drop as another sign of uncertainty amid fears caused by the Coronavirus.

The sudden drop in oil prices caused a plunge in the stock market with the S&P 500 plunged 7.4% in the first few minutes after the opening bell before trading was halted by the market’s circuit breakers, first adopted after the crash of October 1987 and modified over the years to give investors a chance to catch their breath. The market-wide circuit breakers have been triggered only once before, in 1997.

The price of oil plunged nearly 25% after Saudi Arabia indicated it would ramp up production after Russia refused to production cutbacks in response to falling demand. Europe fell into a bear market.

U.S. stocks are now down 19% from the peak they reached last month. Bond yields plumbed new lows as investors sought safety.

“In some cases, there is a panic in the market place because of the unknown and the uncertainty and there is no doubt there is an impact right now. You can see it for airlines, for hotels, the cruise ship industry. How long is that going to last, no one knows,” said Ghodsi who has seen other stock market falls and expects things will turn around.

“Obviously one of the key points is going to be that we see the number of people with the virus start to stabilize and go lower,” said Ghodsi.

Until then he’s suggesting this isn’t the time to sell off stocks or to put cash into buying stocks while they are low.

“No one wants to have a stock today. We all wish we could have gotten out two weeks ago. The game plan today is the same as every time we have hight volatility in the marketplace is that you do not want to sell or you really don’t want to jump in with all your cash with the volatility levels where they’re at,” said Ghodsi.

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