S&P 500 set for worst first quarter since 1938

Technology firms Apple Inc (AAPL.O) and Microsoft Inc (MSFT.O) fell in premarket trading after a recent rally that was spurred by investors looking for stocks likely to withstand an economic hit.

Confidence in equity markets had crept back in the past week, thanks to an unprecedented $10 trillion global monetary and fiscal stimulus, but Wall Street’s indicator of future volatility is still close to levels last seen in 2008.

“There is still uncertainty so it’s hard to say that we’re right back to going ‘risk on’ here,” said Jack Janasiewicz, portfolio manager at Natixis Investment Managers Solutions in Massachusetts.

“It wouldn’t be surprising if we get a little bit of weakness in the markets over the next couple of weeks and re-test or break the lows.”

Sliding from the record highs of mid February, the Dow Jones and S&P 500 indexes are now set to end the quarter more than 18% lower from the start of the year as the health crisis deepens in the United States and disrupts supply chains.

The declines have erased more than $5 trillion from the value of S&P 500 firms in the first quarter, and investors fear corporate defaults and more mass layoffs going in to the second quarter.

The blue-chip Dow is on course for its biggest quarterly percentage decline since 1987 and the tech-heavy Nasdaq is set to close out its worst first three months of the year since 2008.

“It’s the last day of the quarter, and it’s been a quarter to forget, a horrible quarter,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

“There is a good chance that the lower open can reverse during the course of the day because bargain hunting is now coming into the picture.”

At 08:38 a.m. EDT, Dow e-minis 1YMcv1 were down 166 points, or 0.75%, S&P 500 e-minis EScv1 were down 21.25 points, or 0.81% and Nasdaq 100 e-minis NQcv1 were down 45.25 points, or 0.58%.

Oil stocks were among the big premarket gainers, boosted by a rebound in prices from 18-year lows after the United States and Russia agreed to discuss stabilizing energy markets. [O/R]

The energy sector has been the worst performer this year, losing more than half its value.

Investors have so far largely shrugged off figures showing the extent of the economic damage from the statewide lockdowns. Consumer confidence data for March, due at 10 a.m. ET, is likely to drop to a reading of 110 from 130.7 a month earlier.

(The story corrects second bullet to say Dow set for worst “first quarter” ever, not “worst quarter”. The story was refiled to fix a typo in paragraph 1)