Dow plunges 300 points as oil falls below $50

Posted at 1:59 PM, Jan 05, 2015
and last updated 2015-01-05 13:59:03-05

(CNN Money) – It’s quite the sobering Monday on Wall Street as many traders and investors return from their holiday hiatus.

TheDow plunged over 300 points in mid-day trading as stock markets around the world fell sharply.

What’s going on? The main culprits of market jitters these days are falling oil prices and the souring global economy. Crude oilnow trades at about $50 and even dipped briefly below that level on Monday — another psychological threshold for the market.

Experts now predict oil could go as low as $40 or even $30 a barrel. While that’s great for U.S. consumers, who are enjoying gas prices of$2 or lessnot seen since the worst of the Great Recession, there comes a point when sustained low prices begin to really hurt energy company stocks and jobs in the U.S. and other countries around the world.

Today’s biggest stock losers are all energy drillers — Denbury Resources (DNR), Noble Energy (NBL) and Anadarko Petroleum (APC).

Warning signs: But the bigger picture is that stocks are overdue for a correction — when the market falls 10% or more. There was a close call in early October when U.S. markets dipped, but they never quite got to an official correction.

Goldman Sachs put out a warning note Monday, cautioning that professional investors may be “unduly bullish.”

The bank’s Sentiment Indicator is at 100 — the highest possible level. Historically, that hasn’t been good. When the indicator gets that high, it’s usually followed by a decline in stocks in the following six weeks.

CNNMoney’s Fear & Greed Indexwent from “Neutral” a week ago to “Fear” today, another barometer showing that the sentiment on Wall Street is shifting back into anxious mode.

Bonds & the euro: Perhaps the ultimate fear gauge is the yield on the U.S. 10-year Treasury bond. Whenever stocks look ugly, investors flee to American bonds. The yield fell steeply Monday — coming very close to 2% again — another key barrier that traders watch.

Then there’s Europe. Already wobbling near a recession, Europe is struggling to keep Greece in the euro. The euro hit a 9-year lowagainst the U.S. dollar Monday, and all the major European stock markets closing down 2% or more.

Stock pickers are still forecasting gains for 2015, but most say the uptick will be more modest this year than the past few years of double-digit U.S. stock market gains. They also expect volatility to pick up.