U.S. stocks set to drop as oil sinks to $30

By Matt Egan
Call it a Super Bowl hangover.
The stock market’s terrible start to 2016 just got worse with the Dow dropping 250 points on Monday morning.
Things are even bleaker for the technology-heavy index Nasdaq, which tumbled 2.3% and is on track to close at its lowest level since at least October 2014. The S&P 500 is down 1.6% and is now off 9.5% this year.
Wall Street is once again under pressure from the crash in oil prices. Oil fell another 2% and dropped back below $30 a barrel. Cheap oil is great for consumers but its dramatic downfall continues to alarm investors who fear what it signals about the health of the broader economy.
Energy stocks continue to tank, with ConocoPhillips and Hess down another 2%. But those losses pale in comparison with the plunges for Williams Companies and Chesapeake Energy, the two energy stocks down between 25% and 30% today.
The markets are also expressing alarm about European banks. Stock markets in Europe continue to slump badly, with Germany’s DAX and France’s CAC 40 dropping about 2.5% apiece.
Bespoke Investment Group noted rising “market fears over the solvency — profitability, liquidity and stability — of the European banking system.” The firm pointed to a huge rise in the cost to insure European bank debt.
It’s the “kind of parabolic price action that feels like a crisis, even if there’s no concrete evidence that one is afoot,” Bespoke wrote.
Few stocks in the Nasdaq have anything to do with oil prices or European banks — yet the index continues to plunge. The Nasdaq is now down nearly 15% on the year, compared with “only” 8% for the Dow. Former tech darlings Netflix, Tesla and Amazon dropped again on Monday, continuing their 2016 plunge that symbolizes investors’ waning appetite for risk.
One of the only bright spots this year is gold, which tends to rise during times of fear. Gold prices have soared 12% this year, including a 2% jump on Monday to $1,185 an ounce.
CNNMoney’s Fear & Greed Index, which measures sentiment based on several market indicators, is back in “extreme fear.” The gauge briefly improved to just “fear” last week.
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