Dow plummets 331 as oil drops below $50

January 06 05:52 2015

Stocks suffered their biggest drop in months Monday with the Dow diving about 330 points as crude oil plunged below $50 a barrel and the euro sank to a nine-year low. Major Europe benchmarks ended down as much as 3.3%. The Dow and S&P 500 ended down 1.9% and 1.8% respectively — a crushing 331.34-point loss for the Dow. Monday marked the S&P 500′s first four-day losing run since 2013. The Nasdaq composite finished 1.6% lower.the-percentage-of-americans-playing-the-stock-market-is-at-an-all-time-low

“When I see oil prices down 4% and European equity indexes down 1%, 2%, 3%, it’s just a sloppy day,” says Andy Brooks, vice president and head of equity trading at T. Rowe price. The S&P 500 shed nearly 38 points to 2020.58 while the Nasdaq lost 74 points to 4652.57. The Dow ended the day at 17,501.65. The price of a barrel of light, sweet crude oil fell below $50, to $49.97, in electronic trading on the New York Mercantile Exchange. Russian output reached a post-Soviet-era peak, while demand in Europe and elsewhere continued to decline.

Traders are fearful that collapsing oil prices somehow signal the rising risk of a global recession, says Doug Sandler of Riverfront Investment Group. Some fear this kind of extreme move in the price of oil, “is an indicator of recession on the horizon,” Sandler says. “We don’t believe that. There are plenty of policy tools central bankers can use,” Sandler says.

Falling energy prices might seen like a boon for consumers, but it’s somewhat of a problem for corporate profit. Operating earnings from the energy sector in the Standard and Poor’s 500 stock index fell 26.6% in December 2014 vs. a year earlier, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. That drop, in turn, helped push the S&P 500′s operating earnings down 5.6% during the same period.

But it wasn’t all energy. “Half the sectors in the S&P 500 are down 2% or more today,” says Sam Stovall, chief equity strategist for S&P Capital IQ. The materials sector fell about 3%, and industrials and financials also were hit hard. Holding up better than average: Health care, consumer staples and utilities. Much of the malaise came from overseas. The euro dropped to $1.19, its lowest value since December, 2005 as a potential election victory for Greece’s anti-austerity Syria party has raised concerns Greece won’t meet its bailout obligations and will abandon the euro.