Energy companies were pummeled as the price of crude oil sank 7 percent, threatening more damage to an industry that has already been stricken with bankruptcies, layoffs and other cutbacks.
The price of U.S. crude fell below $27 a barrel amid a global glut in oil supplies that seems to be getting worse. That's the lowest price since May 2003 and a far cry from the $100 a barrel it fetched in the summer of 2014.
Overseas markets fared no better. 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.
Gold and U.S. government bonds, traditional safe havens, rose in value as investors shifted money out of stocks.
Still, James Liu, global market strategist for JPMorgan Funds, said the global economy remains relatively healthy and demand for oil hasn't fallen off. But production is too high, so tremendous stockpiles have accumulated. While companies started shutting down drilling rigs in late 2014 after prices started to decline, production of oil didn't change much.
"We're starting to see production declines basically two years after rig count started to decline," Liu said. He said production will keep falling and oil prices will stabilize in the middle of 2016, then start rising.
Jack Ablin, chief investment officer of BMO Private Bank, said he thinks stocks will fall a bit further still. 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.
Al Jazeera and The Associated Press
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