Dow Sheds More Than 300 Points as Oil Slumps

Crude oils slide below $50 sent the Standard & Poors 500 Index (SPX) to its biggest drop since October on Monday as selling spread from the energy industry amid concern that cuts in capital spending will hurt earnings.

Energy shares in the S&P 500 plunged 4 percent as West Texas Intermediate sank to the lowest since April 2009. Exxon Mobil Corp. lost 2.7 percent and Chevron Corp. retreated 3.9 percent. Caterpillar (CAT) Inc. declined 5.3 percent and an index of railroad stocks lost 3.2 percent on concern that the energy slump may hurt spending on capital equipment and crude transportation.

The S&P 500 dropped 1.8 percent to 2,020.90 at 4 p.m. in New York, for its first four-day losing streak since 2013. The gauge fell below its average price for the last 50 days. The Dow Jones Industrial Average retreated 327.49 points, or 1.8 percent, to 17,505.50.

Carlo Allegri/Reuters Traders work on the floor of the New York Stock Exchange.

Commodities are really a leading indicator as to the health of the global economy, Bruce Bittles, chief investment strategist at Milwaukee-based RW Baird & Co., which oversees $110 billion, said in a phone interview. The concern is that the global economy will hurt the US stocks, S&P particularly, because theyre made up of a lot of multinational companies.

While all 10 major industries on the S&P 500 retreated today, with materials producers industrials each tumbling more than 2 percent, energy shares paced declines to extend a selloff that began last June. Denbury Resources Inc. sank 8 percent and Noble Energy Inc. tumbled 9.6 percent for the biggest drops in the S&P 500.

Bear Market

The gauge of 43 energy producers has plunged 23 percent since an all-time high in June, as oil prices entered a bear market amid a supply glut spurred by the highest U.S. output in three decades and OPECs refusal to cut production.

Oil declined for a third day today, falling as much as 6.7 percent in London and sinking below $50 a barrel in the U.S. for the first time since April 2009.

It looks as if oil prices are going to continue to see lower lows in the course of the next couple weeks, and it puts together a risk-off trading environment within the markets, said Chad Morganlander, a money manager at St. Louis-based Stifel, Nicolaus & Co., which oversees about $160 billion.

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Dow Sheds More Than 300 Points as Oil Slumps