Dow closes with 7.8% drop, largest since 2008 on oil slump and coronavirus fears

Stocks are cratering as markets close on Monday, with the Dow down close to 7 percent in the largest single-day drop in NYSE history and the S&P and Nasdaq not far behind. Coronavirus and a drop in oil prices are to blame.

The Dow was down 7.8 percent at the close of trading on Monday, with the S&P and Nasdaq not far behind at -7.61 percent and -7.29 percent, respectively. Plunging oil prices - the commodity lost 30 percent of its value overnight - and coronavirus-related panic took a big bite out of stock values, leading to one of the worst trading days since the 2008 crisis.

The US wasn’t alone in having its bottom drop out - markets around the world were feeling the sting, from Greece - hit the worst with a 13 percent drop - to China, which got off comparatively easy at -3 percent. However, China has been feeling the effects of the coronavirus panic for longer than anyone.

The epidemic, which has hit most of the world’s economic hotspots, has depressed demand for oil, leading to the price drop that triggered the day’s panic-selling - a vicious cycle that doesn't seem likely to stop anytime soon.

The epidemic, which has hit most of the world’s economic hotspots, has depressed demand for oil, and last week’s OPEC meeting failed to reach an agreement to further cut production to shore up prices. Russia objected to the production cut, instead holding out to maintain existing cuts, only for Saudi Arabia to offer its oil at an even deeper discount - while suggesting it would increase production. The resulting price war triggered a massive tumble in value, sending the commodity down to levels not seen since the 1991 Gulf War.

While Russia has insisted it can weather the collapse, analysts have warned that both the Saudis, whose economy is almost entirely dependent on oil, and the US shale industry, which pays considerably more to get the commodity out of the ground, are imperiled by continued low prices.

But the crash could be just a temporary setback. “Markets nearly always overreact in the short term,” Peter C. Earle, a research fellow at the American Institute for Economic Research, told RT. “At present equity markets around the world are responding to uncertainty about the economic impact of the coronavirus. But while the Saudi move is likely to be bad for oil companies, oil is a major factor of production and lower prices actually constitute a very positive development for most other industries and consumers as well.”

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