Dow falls for first time in 9 days on fears spiking oil will slow the global economy, GM declines

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Stocks fell on Monday amid fears that a surge in oil prices following an attack in Saudi Arabia could slow down global economic growth.

The Dow Jones Industrial Average slid 70 points, or 0.3%, after briefly falling more than 100 points. It would be the first decline in nine days for the Dow, which had climbed back to within 1% from a record on Friday. The S&P 500 and Nasdaq Composite pulled back 0.3% and 0.5%, respectively. 

 

West Texas Intermediate futures jumped more than 9% to trade at $60.07 per barrel. WTI briefly rose more than 15% overnight. The sharp move higher comes after a series of drone strikes on Saturday knocked out about half of Saudi Arabia’s daily crude production.

Saudi Aramco, Saudi Arabia’s national oil company, will reportedly try to restore about a third of the country’s production by Monday.

General Motors shares fell 3% after the United Auto Workers union went on strike after contract talks between the two entities broke down. Higher gasoline prices could also potentially hurt sales.

 

Airlines JetBlue Airways and United Airlines dropped at least 3% each while American Airlines lost 6.5%. Devon Energy skyrocketed more than 12% before the bell while Marathon Oil jumped 12.6%.

Retailers Target and Walmart slipped more than 0.5% each. Dow members Exxon Mobil and Chevron rose more than 3% each.

President Donald Trump tweeted Sunday before the futures open the U.S. could use oil from its Strategic Petroleum Reserve to keep the market “well-supplied.”

Consistently higher oil prices could lead to increasing fuel prices. This would put more pressure on a global economy that is already coping with a slowing manufacturing sector and stubbornly low growth.

This “is the largest supply shock ever. The world is dependent on strategic reserves right now and you will see SPR draws,” said Bob Ryan, chief commodities and energy strategist at BCA Research, in a note. “The market could tighten significantly if the outage is indeed weeks and not days.”

Sentiment was also depressed after China’s industrial production fell to a new 17½-year low. Production rose 4.4% in August while analysts polled by Reuters expected a gain of 5.2%. The industrial-production slowdown came as China and the U.S. remain embroiled in a trade war.

The major indexes posted solid weekly gains last week and closed in on record highs set in July. Through Friday’s close, the Dow and S&P 500 were both about 0.7% below their all-time highs while the Nasdaq was nearly 2% away from its record.

“Market breadth is improving as value stocks begin to catch a bid,” said Craig Johnson, chief market technician at Piper Jaffray, in a note. But “at this juncture, we suspect most of the good news is already priced in and the downside risk from any disappointment is high.”