NEW YORK — U.S. stocks slumped Wednesday as the price of oil suffered its worst one-day drop since September, and the Standard &Poor’s 500 index fell to its lowest level in almost two years.
NEW YORK — U.S. stocks slumped Wednesday as the price of oil suffered its worst one-day drop since September, and the Standard &Poor’s 500 index fell to its lowest level in almost two years.
Investors are worried that low oil prices mean there’s not that much demand for fuel. That would be a sign that growth in the global economy is slowing down. Stocks in the U.S. started sharply lower following widespread selling overseas, and looked like they were headed for huge losses. At one point the Dow Jones industrial average fell as much as 565 points.
After a late recovery, the Dow closed down 249.28 points, or 1.6 percent, to 15,766.74. The S&P 500 index fell 22 points, or 1.2 percent, to 1,859.33. That is its lowest closing price since April 2014.
The Nasdaq composite, which briefly turned positive in the afternoon, lost 5.26 points, or 0.1 percent, to 4,471.69. The Dow is the lowest it’s been since August, and the Nasdaq is at its lowest since October 2014.
U.S. crude dropped $1.91, or 6.7 percent, to $26.55 a barrel in New York. That was the biggest one-day plunge for U.S. oil since Sept. 1. U.S. crude is down 28 percent in 2016 and is trading at its lowest level since May 2003.
Brent crude, a benchmark for international oils, fell 88 cents, or 3.1 percent, to $27.88 a barrel in London.
James Liu, global market strategist for JPMorgan Funds, said demand for oil hasn’t fallen off and the global economy remains relatively healthy. But companies are still producing a great deal of oil, so tremendous stockpiles have accumulated. While companies started shutting down drilling rigs and wells in late 2014 after prices started to decline, production of oil didn’t change much.
Liu predicted production will keep falling and oil prices will stabilize in the middle of 2016, then start rising. “I think that will alleviate some market concerns,” Liu said.
The falling price of oil is bad news for companies that drill for oil and sell it, and those companies have slashed jobs and cut back on work to reduce their costs. Banks have lent billions of dollars to energy companies to fund their work, and investors are worried the banks won’t get their money back. It’s good news, however, for car owners and for companies that use a lot of fuel.
Energy stocks were pelted. Devon Energy lost $1.89, or 8 percent, to $21.49 and Exxon Mobil sank $3.22, or 4.2 percent, to $73.18. Financial stocks were also hit because banks could lose billions on loans to oil and gas companies. Bank of America lost 55 cents, or 3.9 percent, to $13.69.
Gold and U.S. government bonds, traditional safe havens, rose in value as investors shifted money out of stocks.
Overseas markets also fell. Japan’s Nikkei index entered a bear market, down 20 percent from its peak in June, and European benchmarks lost between 3 and 4 percent.
Jack Ablin, chief investment officer of BMO Private Bank, said he thinks stocks will fall a bit further, but he doesn’t expect a global collapse. Ablin said that for years, investors bought stocks without too much regard for risk. He said investors felt that if things ever got too bad, the Federal Reserve would help prop up the market.
Commercial tech giant IBM said its revenue fell for the 15th consecutive quarter. Sales fell about $170 million short of Wall Street forecasts. The stock shed $6.25, or 4.9 percent, to $121.86, for the biggest loss in the Dow average.