U.S. equity markets pared steep declines to end off session lows after a sharp selloff in oil weighed heavily on the energy sector, dragging major names in the space lower.
The Dow Jones Industrial Average shed 115 points, or 0.65% to 17731. The S&P 500 declined 14 points, or 0.70% to 2077, while the Nasdaq Composite slid 40 points, or 0.79% to 5101.
Energy was the biggest decliner on the session, dropping more than 4% at session lows.
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Oil prices continued to be a focal point for global markets after Friday’s OPEC meeting in which members opted to keep current production levels unchanged. The move came after speculation a cut could be on the horizon for the oil cartel in an effort to try to rebalance global prices, which hang at multi-year lows as a global supply glut weighs on the market.
Peter Kenny, independent market strategist, said the oil story has been one that has increasingly weighed on the S&P 500 thanks to the energy sector’s weight.
“If you remove the energy sector from the S&P 500 in 2015, earnings rose by roughly 7% in an economy that expanded by roughly 3%. We should see some of the recent hyper-volatility drained from pricing, but will likely see some continued pressure on crude well into 2016,” he said.
Indeed, the S&P’s energy sector is the worst performing of the 10 sectors so far this year, down more than 19%, seeing the steepest decline since 2008. Major industry players including Exxon (NYSE:XOM), Chevron (NYSE:CVX) paced considerably lower during the session, taking about 29 points of the Dow, while the energy sector as a whole dropped more than 4%.
U.S. crude ended the session down 5.80% to $37.65, after closing below the psychologically-significant $40 a barrel on Friday. Monday’s settle was the lowest since February 2009, and allowed the commodity to hit a fresh 52-week low.
Brent, the international benchmark, shed 5.28% to $40.73 a barrel, also settling at a fresh 52-week low, and notching the lowest settle price since February 2009.
Elsewhere in commodities, metals, meanwhile, were also lower as gold slipped 0.95% to $1,073 a troy ounce, while silver shed 1.36% to $14.33 an ounce. Copper declined 1.56% to $2.05 a pound.
The Labor Department’s report of 211,000 new jobs created last month still hung with Wall Street on Monday after a blockbuster rally on Friday, which tacked on more than 300 points, as traders bet the data helped give the Federal Reserve more confidence to hike short-term rates this month.
Chris Beauchamp, senior IG market analyst, said in a note Monday morning that as long as the Fed stays the course, the markets are primed for an environment of a stronger U.S. dollar and higher global markets. But if the Fed is spooked and opts to keep rates steady at its meeting next week, there could be consequences – as illustrated by Thursday’s tantrum following a monetary policy announcement from the European Central Bank, which was seen as not accommodative enough.