Roller-coaster ride:
U.S. stocks bounced back to a loss of 249 points at closing after an opening plunge; oil fell below $27 a barrel.
U.S. stocks slumped Wednesday as the price of oil suffered its worst one-day drop since September. A huge sell-off earlier in the day pushed the Standard & Poor’s 500 index 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 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 1.56 percent, to 15,766.74. The S&P 500 index fell 22 points, or 1.2 percent, to 1,859.33. The Nasdaq composite, which briefly turned positive in the afternoon, lost 5.26 points, or 0.1 percent, to 4,471.69.
U.S. crude dropped $1.91 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 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.
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.
BMO Private Bank chief investment officer Jack Ablin said he thinks stocks will fall a bit farther, 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.
“Investors were comfortable taking outsize risks, not because they had earnings to fall back on, but because they had the Fed to fall back on,” Ablin said. So stocks made huge gains in the years since the financial crisis while the U.S. economy churned out years of steady but unspectacular growth.