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Dow drops more than 500 points to start the week after historic oil plunge

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NEW YORK, NEW YORK – MARCH 18: Traders work on the floor of the New York Stock Exchange (NYSE) on March 18, 2020 in New York City. The Dow fell more than 1,200 points today as COVID-19 fears continue to roil world markets. (Photo by Spencer Platt/Getty Images)

Stocks fell sharply Monday, retreating after back-to-back weekly gains, as a historic decline U.S. crude prices raised concerns about the economic damage being done by coronavirus shutdowns. A delay in funding the depleted small business rescue loan program also weighed on sentiment.

The Dow Jones Industrial Average closed 595 points lower, or 2.5%. The S&P 500 slid 1.8%. The Nasdaq Composite pulled back 1%. 

Boeing fell more than 6% to lead the Dow lower while Chevron and Exxon Mobil dropped more than 4% each. Energy, real estate and utilities were the worst-performing sectors in the S&P 500, falling more than 3% each. 

A historic fall in energy prices raised concerns about how deep the economic slowdown will be this quarter. The May contract for West Texas Intermediate, which expires on Tuesday, plunged more than 100% to settle at negative $29.75 per barrel on weak demand outlook and storage capacity issues.

The negative impact on stocks from oil likely would have been worse were it not for lesser declines in oil contracts expiring during future months. WTI’s June contract slid over 15.6% to $21.09 per barrel. July’s oil contract was down 6.9%. It was a strange phenomenon that analysts chalked up to the collapse in demand for oil contracts expiring this week. Refineries don’t need the oil and are near storage capacity with most of the country shut down.

“The moves in the oil market are really just unbelievable now that we are literally running out of storage space,” Peter Boockvar, chief investment officer at Bleakley Advisory Group, said in a note. “I do believe that these types of moves is what bottoms are made of and in May and June when things start to reopen again it will go a long way in helping along with the production cuts.”

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