NEW YORK (CNNMoney) — Oil keeps diving — and it’s taking Wall Street with it.
The Dow plunged 540 points on Wednesday after crude oil plummeted another 7% and crashed below $27 a barrel. The S&P 500 slumped 3.5% to its lowest intraday level since October 2014. The Nasdaq is down another 3.5%.
It’s the latest blow in what’s already been the worst start to a year on record for the stock market. The Dow is now down more than 11% in 2016.
“Despite improving valuations, global equities continue to get hammered,” Bespoke Investment Group wrote in a client note. The firm said the appetite for risk remains “awful.”
Turmoil in China and the crash in crude oil prices remain the main culprits for the market mayhem. While China’s stock market dropped “only” 1% overnight, the energy market was considerably less quiet.
Crude crumbles below $27 — freaking Wall Street out
Oil prices crashed another 7% on Wednesday and broke below $27 a barrel for the first time since September 2003. It’s currently trading at $26.30 a barrel, down an incredible 29% since the beginning of the year.
Crude oil has been slammed in recent days by concerns over sanctions lifting on Iran, which is expected to flood the world with more oil at exactly the worst time, given the supply glut.
“Sentiment has certainly turned sharply negative. Markets are probably not likely to stabilize until oil finds a bottom,” David Joy, chief market strategist at Ameriprise Financial, wrote in a client note.
Some oil stocks down 10% — today alone
Cheap oil is great for car drivers but it’s freaking Wall Street out for a many reasons. First, the oil crash is hurting corporate profits, especially in the energy sector. The S&P 500 energy group plunged another 6% on Wednesday, leaving it down 16% this year. Shares of Devon Energy, Consol Energy and Murphy Oil all plummeted 10% or more on Wednesday.
Low oil prices are raising the specter of a wave of bankruptcies in the energy sector. Already, dozens of oil companies have filed for bankruptcy. Investors are also worried that cheap oil signals something very negative about the health of the global economy.
Global markets remain in turmoil, with Japan’s benchmark Nikkei 225 tumbling into bear market territory on Wednesday. That’s market jargon for when an index or a stock dives 20% from a prior high. Stocks in Europe also got rocked, with the benchmark index’s in the U.K. and France dropping 3.5% apiece and Italy’s market plunging nearly 5%.
Watch this critical threshold for stocks
The key level to watch on Wall Street is 1867.01 on the S&P 500. That’s the intraday low on August 24, the day the Dow freaked everyone out by briefly plummeting more than 1,000 points.
The S&P 500 is already below that level. What will be key is if the index closes below that threshold.
Michael Block, chief market strategist at Rhino Trading, thinks U.S. stocks “look oversold” at current levels and believes now is the time to look for buying opportunities.
“I am watching that August low and below that is where I come alive, albeit carefully,” Block wrote in a client note. “I am not jumping in with both feet.”
Nearly all stocks are down this year
Signs of fear abound on Wall Street. The 10-year Treasury yield slipped back below 2% on Wednesday as investors rush to the safety of government debt.
CNNMoney’s Fear & Greed Index, which monitors a series of market indicators to gauge sentiment, is flashing “extreme fear” and nearing single digits.
Just 24 stocks in the S&P 500 are trading higher on the year. The biggest winners are defensive play ConEd and Macy’s, the struggling department store that just announced plans to cut thousands of jobs.
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