NEW YORK — After six months of falling oil prices, investors are starting to worry that the prolonged slump is signaling a weaker global economy.
That fear shook financial markets Monday as oil plunged again, dipping below $50 for the first time in more than five years. Oil prices recovered slightly, closing the day at $50.04, down $2.65 a barrel. The drop prompted a big sell-off, not just among energy stocks, but across the entire stock market.
Stocks had already endured a weak open because of concerns that Greece could exit the euro, adding to worries about the poor outlook for growth in that region. As oil slid further, the stock selling accelerated, pushing the Standard & Poor’s 500 index to its biggest loss in months.
Since the decline began, investors have been working on the assumption that lower oil prices, caused by a glut in supply, will be a boon to the U.S. economy. On Monday, that thesis was discarded as prices plunged further and investors started to fret about the wider implications of the drop.
“The lower that oil prices go, the more it reinforces into the market’s mind that perhaps this is more of a demand issue than a supply issue,” said Burt White, chief investment officer at LPL Financial.
The S&P 500 index dropped 37.62 points, or 1.8 percent, to 2,020.58. That was the biggest one-day slump for the index since Oct. 9. The Dow Jones industrial average fell 331.34 points, or 1.9 percent, to 17,501.65. The Nasdaq composite fell 74.24 points, or 1.6 percent, to 4,652.57.
Most analysts and economists predict that, on balance, a decline in oil prices helps the broader economy because it reduces energy costs for industrial companies.
Lower gas prices also put more money in the pockets of consumers.
But there are downsides as well. As the price of oil slumps, some companies in the energy industry will go out of business. Not only will that cost jobs in the sector, but it will also cut spending on things like plants and equipment.
