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Dow plunges 300 points as oil falls below $50

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(CNN Money) – It’s quite the sobering Monday on Wall Street as many traders and investors return from their holiday hiatus.

The Dow plunged over 300 points in mid-day trading as stock markets around the world fell sharply.

What’s going on? The main culprits of market jitters these days are falling oil prices and the souring global economy. Crude oil now trades at about $50 and even dipped briefly below that level on Monday — another psychological threshold for the market.

Experts now predict oil could go as low as $40 or even $30 a barrel. While that’s great for U.S. consumers, who are enjoying gas prices of $2 or less not seen since the worst of the Great Recession, there comes a point when sustained low prices begin to really hurt energy company stocks and jobs in the U.S. and other countries around the world.

Today’s biggest stock losers are all energy drillers — Denbury Resources (DNR), Noble Energy (NBL) and Anadarko Petroleum (APC).

Warning signs: But the bigger picture is that stocks are overdue for a correction — when the market falls 10% or more. There was a close call in early October when U.S. markets dipped, but they never quite got to an official correction.

Goldman Sachs put out a warning note Monday, cautioning that professional investors may be “unduly bullish.”

The bank’s Sentiment Indicator is at 100 — the highest possible level. Historically, that hasn’t been good. When the indicator gets that high, it’s usually followed by a decline in stocks in the following six weeks.

CNNMoney’s Fear & Greed Index went from “Neutral” a week ago to “Fear” today, another barometer showing that the sentiment on Wall Street is shifting back into anxious mode.

Bonds & the euro: Perhaps the ultimate fear gauge is the yield on the U.S. 10-year Treasury bond. Whenever stocks look ugly, investors flee to American bonds. The yield fell steeply Monday — coming very close to 2% again — another key barrier that traders watch.

Then there’s Europe. Already wobbling near a recession, Europe is struggling to keep Greece in the euro. The euro hit a 9-year low against the U.S. dollar Monday, and all the major European stock markets closing down 2% or more.

Stock pickers are still forecasting gains for 2015, but most say the uptick will be more modest this year than the past few years of double-digit U.S. stock market gains. They also expect volatility to pick up.

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4 comments

  • JB

    oh god! low gas prices are a bad thing!
    cheap energy is going to kill the jobs market!
    quick, tax them back up and save us from this looming disaster!

    lol..who writes this smut.
    and worse still, who believes it?

    • proudoilfieldwife

      JB, you must not be related to the oilfield in any way or you would know just how bad it really is in this day for oil and gas to drop like it has. Our family is 20 years oilfield and my husband risks his life everyday going to rigs etc to make sure that they have everything needed to run properly so that we can produce oil. So far his company has had to lay off 1,000 people (with families) and now our family that includes 3 young daughters are facing this possibility if it doesn’t change. Are you going to pay my family medical insurance, groceries etc if my husband loses the job that provides our main income??!!?? The prices of gas went up because of the cost of living etc. If OPEC would keep their noses out of our business our etconomy would be fine. Couple them with an idiot president and that makes it worse. I pray you don’t have to face what our family is facing. Older men and women have a lot harder time trying to get a job and for my husband who has only taken sick/vacation time from work in 20 years to provide for his family and being in his 40’s would devestate him as he has never been without a job!

      • JB

        “. Are you going to pay my family medical insurance, groceries etc if my husband loses the job that provides our main income??!!??”
        No, did you pay for mine when you were making money hand over fist and I lost my job do to cutbacks due to the recession and high fuel prices? no, you sure did not…
        so…now that the shoe is on the other foot, in that I can save money and do better for my family,
        I am supposed to feel for the people who prospered and made money off my misery?
        that is called karma, so please keep the tears to a minimum…none were shed for the rest of us then.
        now there are none being shed for you and yours.
        life is like that.